At Record Gold Prices, Here’s What a Financial Planner Wants You to Know Before Investing
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- Although numerous people purchase gold as protection against inflation, financial planner Jake Skelhorn informed me that this strategy can be quite perilous.
- Instead, buying gold makes sense if it's a way to diversify my investments — and gold IRAs work well.
- Before buying gold, he told me to consider all the other costs I might face.
My husband and I have always kept our finances and investments separate. But recently, we have started to commingle some of our money and work together on joint goals. Last year, we opened up a joint bank account and credit card to fund our family expenses.
This year, we're strategizing a few ways we can invest our cash together to diversify our portfolios. Now that the price of gold is at an all-time peak, something we have been considering is the possibility of investing in gold bars .
A number of our acquaintances recently purchased gold bars as part of their effort to diversify their investment portfolios, prompting us to consult a certified financial advisor. Jake Skelhorn to learn more.
1. It could potentially not be the most suitable choice when considering inflation.
When I inquired with Skelhorn about why individuals purchase gold bars, he mentioned that the primary rationale is typically for hedging purposes. inflation .
He stated that when the market becomes volatile, individuals look for options that appear more secure or help protect against inflation. However, he added that purchasing gold doesn’t necessarily provide the best defense against inflation.
This is due to Skelhorn stating that the cost of gold can vary significantly. Despite the fact that the demand for gold tends to rise during times of economic instability, the actual pricing of gold isn’t linked to inflation; rather, it’s determined by supply and demand dynamics.
If protecting your funds from inflation is your aim, Skelhorn suggests adopting a long-term approach focused on government securities. bonds or the stock market.
2. The tax rate for gold is higher.
Skelhorn highlighted that gold faces a more substantial tax compared to typical investment types.
He mentioned that capital gains tax on gold stands at 28% if it’s held for more than a year. In contrast, other investments such as stocks or real estate might face taxes ranging from 0-20%, based on your overall annual income.
However, if your aim is to put money into an investment option that has favorable taxation, Skelhorn pointed out that you could choose to invest in a gold IRA .
He explained that this means you won’t owe any capital gains taxes when purchasing or selling funds within your IRA.
3. Investing in gold does not generate any income.
Skelhorn also pointed out to me that purchasing gold won't generate an income for me.
He mentioned that unlike stocks or bonds, which can generate interest or dividend income, purchasing gold bars doesn’t provide any revenue since they merely sit idle.
Skelhorn mentioned that the sole method to profit from gold bars involves selling them at a price higher than what was paid for them.
4. Adding gold to your investments can increase the diversity of your portfolio.
Skelhorn indeed verified that putting money into gold might be an effective strategy for expanding and diversifying my investment portfolio.
He mentioned that gold does not have a correlation with other asset categories such as stocks or bonds. Therefore, if the stock market declines, it doesn’t necessarily imply that the cost of gold will fall alongside it.
He mentioned that prior to purchasing gold bars, we must recognize that additional charges might apply based on our method of purchase and storage.
Regardless of whether you're establishing a Gold IRA or purchasing tangible gold to broaden your investment portfolio, Goldco Can assist you in smoothly navigating the procedure. Order your complimentary kit right now. or read our Goldco review for more information.The article was initially released in July 2024.
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