by Nathan Frederico
When driving around town, I usually listen to CNBC on Sirius XM Radio (SIRI). Every so often I hear an ad that talks about how to turn your IRA into a ‘Gold IRA’. It sounds exciting, mysterious, and intriguing – which is exactly what they want so you’ll call and pay for their ‘golden’ information. In reality the answer is quite simple.
One common misconception is that an IRA is an actual investment. However, an IRA, or Individual Retirement Account, is just an account type. There are many different types of IRAs (Simple, SEP, Roth, Traditional). Each is designed to take advantage of different tax benefits. In your IRA you can hold many types of equity positions, bond holdings, money market positions, and other securities.
Now, how do you get gold into your existing IRA? If your IRA is at a major brokerage firm, like TD Ameritrade or e*Trade, one way is through a type of security called an Exchange Traded Fund (ETF). You can buy ETFs for your IRA just like you buy a stock. ETFs are managed by large investment companies such as Blackrock, Vanguard, and Fidelity, just to name a few. These companies manage ETFs much like mutual funds, but allow them to trade like stocks. This allows for the ETF share price to increase or decrease as the fund exchanges hands. Mutual funds on the other hand, only change prices at the end of each trading session. ETFs, like mutual funds, usually have specialized objectives.
As you might expect, there are gold ETFs. These ETFs are tied to the performance of gold as it trades in the precious metals futures markets. As we’ve witnessed the meteoric rise in gold prices over the past couple of years, these ETFs have also increased in value. Furthermore, the number of gold ETFs has also increased simply due to the demand from investors.
Here are few ETFs that you might want to consider if you are interested in having gold in your IRA:
While I’ve provided you with some basic information about how to invest in gold for your IRAs, please make sure to consult with your financial advisor before making any changes to your portfolio. Gold, like any investment, is not guaranteed to increase in value. It is not FDIC insured and may lose value.