Do Silver and Gold Belong in Retirement Portfolios?

Since 1997, investors have had the opportunity to add silver and gold to their portfolios through precious metal IRAs. Like any investment, risks and rewards exist when you rollover a portion of your retirement savings into a precious metal IRA. However, should you add silver and gold to your portfolio? Like a coin, there is a duality about the benefits and detriments of adding a precious metal IRA to your portfolio. Due diligence requires an understanding of both the detriments and benefits to make an informed decision.

 

The benefits of silver and gold in your portfolio

There are four reasons why silver and portfolio belong in your retirement savings portfolio.

a. Protection from inflation

Most people are not bothered by inflation, but it should be a major concern for anyone with savings or investments. America experienced 2.5 percent inflation in 2016. Essentially, if you saved money in your bank account, the purchasing power would decrease by 2.5 percent within one year. Inflation is the reason why the price of assets asset prices keeps increasing.

You need to ensure that your savings earn as much or more than the inflation rate in any given year. Silver and gold offer the ultimate protection from inflation because they are not affected by inflationary pressures.

b. Tangible assets

As per 2016, 85 percent of the transactions in America were cashless. The number is a testament of the shift from physical to digital currency. Most investments are digital. Your portfolio says you own some stocks the certificates are digital. Digital assets are dependent on the flow of technology. However, silver and gold are tangible assets you can have. The precious metals allure investors who want some of their wealth in tangible assets.

c. Increase in value

Historically, precious metals have always increased in value. In the 1970s, one gram of gold was worth 35 dollars. In 2016, gold traded at a high of 1600 dollars. Similarly, silver increased from one dollar to 40 dollars over the same period. Respectively, this translates to 4500 and 4000 percent increase in value. Despite volatility in the short-term, silver and gold always appreciate in the long-term.

d. Crisis-proof

The financial crisis led to losses in most sectors of the economy including the secure 401K. However, precious metals at the time rose in value. Precious metals seem to thrive in periods of economic upheaval. Many investors use precious metals as insurance when there are tough economic times. They are the perfect investment when anticipating a bear market run.

 

The detriments of silver and gold in your portfolio

Despite these four benefits of silver and gold, three detriments exist.

1. Silver and gold prices tend to be more volatile when markets are in a bull run. Since they are counter-cyclical to other assets, they are more volatile when stocks and securities are doing well.

2. Silver and gold volatility can be extended for long periods. The silver and gold prices have not had a considerable upsurge since the economic crisis. Precious metals are not suited for the short-term speculative customer. Instead, they are more suited for long-term investors who have the patience to wait until the bull market gives way.

3. Silver and gold do not offer any of the traditional benefits of conventional investment vehicles, like dividends. Instead, the investor has to wait for the price of precious metals to rise to significant levels to make a decent price.

 

Even though there are valid detriments of adding silver and gold to your retirement portfolio, the benefits outweigh them. However, prudent investment practices should be used. Precious metal IRAs are not a get-rich-quick-scheme. Instead, they offer an avenue to diversify your retirement savings to protect you from inflation or economic crisis. Additionally, no more than 20 percent of your retirement savings should be rolled over to a precious metal IRA.