For more than 25 years, Lear Capital has helped people invest in precious metals, which could become an even more popular portfolio diversification option in 2023, according to the company's founder, Kevin DeMeritt.
"The economic uncertainty right now is going to be a big factor," DeMeritt says. "If a recession takes hold [and] we start to see more of these financial instabilities happen around the country - and around the world - [the] demand [for precious metal-based investments] from central banks could intensify, along with demand from institutional and individual investors."
Factors such as the limited availability of gold, silver, and platinum - only so much exists and can be mined and put into circulation - have helped the assets consistently retain value, enabling them to potentially offset some of the lower-than-anticipated returns from investments.
"Gold has an inverse relationship to other types of assets," Kevin DeMeritt explains. "In times of war or economic uncertainty, usually you're going to find the markets become extremely volatile. Nobody knows what's going on from day to day. The asset that gives you some stability while all of those things are happening typically [is] gold."
Consider the 2009 Great Recession, when the availability of cheap credit, relaxed lending standards and rapid home value increases led to a housing bubble and market collapse causing investment and other losses that were so severe the U.S. government had to provide billions of dollars to bail out portions of the financial system - yet gold prices rose.
During all of the 15 recessions that have occurred since 1919, premium rare coins have performed well, according to Lear Capital data. During the 1980s, for example, the CU 3000 Rare Coin index, a price guide compiled by the third-party Professional Coin Grading Service, shot up 660%.
Interested in learning more about investing in precious metals - and the role Lear Capital can play in the process? We've got answers to your most pressing investment questions below.
Are There Ways To Invest in Gold Other Than Buying Mining Company Stocks?
People who'd like to invest in a precious metal asset, such as gold, basically have three options, according to Kevin DeMeritt: buying gold stocks, getting an exchange-traded fund that's backed by physical gold, or holding physical gold assets you've purchased within a precious metal individual retirement account like the Lear Advantage IRA.
That type of physical precious metal asset-based investment offers the reassurance of having a tangible item - gold coins or bars - that investors have complete control over. Stocks and gold-backed funds, on the other hand, can potentially present certain degrees of third-party risks, DeMeritt says.
"With an exchange-traded fund, a lot of that metal is held in a different country; if something goes wrong with [the] bank, you [could] have a problem [getting] the gold back over here," he says. "In most of [the investor agreement] documents, it says, 'If there is an issue, we can trade you into a like-kind asset.' I don't know anything that's like gold, so I don't know what other asset [they could provide that truly equates to it]."
Investors may also find some aspects of gold mining-related investments are completely out of their control.
"You have third-party risks you don't have with physical gold," Kevin DeMeritt says. "[A company] could bribe a government official in another country, then that comes out and the stock potentially crashes. You've got the risk of the CEO hedging gold one way and it goes the other way, and [you don't get] the appreciation you thought you were going to. The company could take on a little bit too much debt, interest rates go up and their earnings crash because interest payments are much higher- and now you pay the price because you own the gold stock, as opposed to the actual physical gold."
How Do Physical Gold, Silver, and Platinum Investments Work?
Investors can roll over a number of retirement accounts - including a Roth, SEP or SIMPLE IRA, 401(k), 403(b), 457(b), pension plan or Thrift Savings Plan account - and buy physical assets like gold to put toward a self-directed IRA.
To qualify as a valid investment item, per the Internal Revenue Service, precious metal coins or bars must possess a certain purity level. Gold assets, for instance, need to have an at least 0.995 fineness.
"The government has made these rules," Kevin DeMeritt says. "If it has the high quality, then you can add it to an IRA; if it does not, then you cannot - [except for] an American Eagle [coin], which does not have that fineness, but the government made an exception [for]."
You own the precious metal assets you purchase; stipulations require they be kept outside of your home, though, in an IRS-approved private storage facility. Lear Capital, which has successfully processed more than $1 billion IRA-related transactions since 1997, has arranged for investors it works with to store their assets at the Delaware Depository, which has safeguarded precious metal items for more than three decades.
What Other Services Does Lear Capital Offer?
Investors understandably may be interested in keeping an eye on precious metal market activity to gauge the returns the items will supply, particularly if they're close to retirement.
To help investors save the time involved in hunting down daily, weekly or monthly price movement information from a variety of outlets, Lear Capital provides numerous resources on its website, including the latest industry news and real-time precious metals pricing updates.
Working with a provider like Lear Capital can also be helpful if you think you might want to sell your precious metal holdings. Lear will provide a personalized estimate of what your assets are worth at a given time upon request; investors can also sign up to receive a notification when a certain precious metal reaches a specific price, positioning them to be able to quickly buy or sell the asset and maximize results.
What Costs Are Involved in Investing in Precious Metals?
Unlike the somewhat complicated plan administration, service, and other fees traditional IRAs and 401(k)s can involve, self-directed precious metal IRAs offer a simple and transparent payment system.
To prevent any confusion, Lear Capital clearly outlines each asset acquisition process step so the investors it works with know what to expect - and also provides a written account agreement and confirmation of the purchase details both in writing and by phone.
In addition, the company offers a 24-hour risk-free purchase guarantee. Investors can cancel their transaction at no cost within 24 hours after receiving their invoice if they decide they aren't ready to invest at this time.
How Do I Access My Precious Metal Investments?
Before you reach the age at which you're eligible to begin taking mandatory distributions, you just need to let your dedicated Lear Capital representative know; they will help guide you through the process.
You can choose to have your precious metal assets shipped directly to you - or receive cash for their current value by having them liquidated, a process that typically takes about a day. The money can be wired to a specific bank account or sent to you by check.
How Can Lear Capital Help Me Get Started?
A Lear Capital account team member will guide through the steps involved in establishing a precious metals IRA account.
Once the account has been created, within 24 hours, Lear Capital can help arrange for your retirement funds to be rolled over to it, typically via bank wire, using your choice of two tax- and penalty-free methods: the direct trustee-to-trustee transfer or the 60-day rollover option.
In the trustee-to-trustee process, money is moved from your current IRA provider directly to your new precious metals IRA.
If you opt for a 60-day rollover, your current IRA account provider will mail a check to your home, which you'll then send directly to your new precious metals IRA provider. No taxes or penalties will be incurred as long as the check is given to the new IRA custodian and deposited into the new IRA account within 60 days.
Retirement can feel far away. Yet with inflation and other elements potentially eating away at the value of what you save, whether you're gearing up to leave the workforce soon or will be an active part of it for some time, Kevin DeMeritt says reexamining your current savings approach - and considering if a precious metals IRA might be a beneficial addition to your portfolio - can help position you to successfully save what you'll need to meet your retirement goals.
"I think people don't spend enough time to figure out how to grow and protect their retirement account for the long-term," Kevin DeMeritt says. They put [money] away, and get a monthly statement; but retirement is 20 years [from now]. People should really take a look at their strategy every year with their financial planner. How you protect that retirement is even more important today with inflation higher."
