Are Gold IRAs Safe ? Disadvantages of Gold Investment
Gold might be a good investment for a number of reasons but , as an investor , you must be aware of the disadvantages of gold investing as well . Are gold IRAs safe ? What are the cons of gold investing ?
1) No Passive Income :
The only time you get return from gold is when its value increases and you decide to sell . Stocks , bonds and other paper assets have the advantage of immediately returning some portion of their value by passive income in the form of interests and dividends . are gold iras a good idea ?
2) Physical Storage and Insurance :
Storage services as well as insurance are must if you decide to buy physical gold . If it becomes damaged and , even worse , stolen – you won’t be able to replace or claim it if it is not properly insured.
3) Higher Tax Rates in Terms of Capital Gain :
USA considers gold as collectibles and hence 28% tax rate is applied in terms of capital gains tax . This rate is much higher than the ordinary capital gains rate of 15% . Having said that mining companies are still taxes at the ordinary rate of 15% although they do not invest in gold directly . gold coins iras
4) Gold Bubble :
When the economy becomes turbulent , investors in bulk start to invest in gold . But when there is a panic situation , gold becomes over-priced . If you invest in gold during this period , you will see a part of your investment vanishing when the price corrects itself . Are gold iras safe ?
5) No Leverage :
Unlike investment in real estate , there is no financing involved and hence there is no leverage to allow you to build wealth . are iras safe investments ?
6) No Tax Advantage :
You cannot take any tax shield benefit and hence there are no tax deferment opportunities . roth iras safe
7) Market Manipulation by Government :
Gold is subject to government confiscation . This factor makes gold investing a risky proposition . The government could come into the scene and store all of the gold if they want to . Then all your investments will be closed and you can do nothing .
8) What is the cost of liquidity ?
There are couple of scenarios where the myth of gold’s liquidity fails . In case of buy-back offers , there are hidden costs involved . When you need to liquidate the investment , you will be charged with a 1.5% premium for meltdown value in addition to S&H and insurance costs. This makes the price of gold highly volatile . Investments such as real estate is less volatile which is attributed to the lack of liquidity and higher transaction costs.
9) Lower Actual Returns :
If the value of gold increases, the gain is only nominal . It does not increase your actual buying power . The reason being that the increase in value of gold typically correlated to the devaluation of paper assets . Furthermore , profits generated by gold is taxable whereas real estate investors enjoy a somewhat ” highly tax-favored ” status . You can enjoy a lifetime tax-free status with a property by means of 1031 tax-deferred exchange . In case the dollar value falls , the value of your asset could appreciate with inflation . If you are smart enough , you can make use of this appreciated asset value with a long-term loan that you will repay for free. Are gold IRAs safe ?
There is no doubt that gold is the most profitable investment when all other forms of investments fail. If your country’s economy is facing a recession , devaluation or inflation , you should add more gold to your investmebt portfolio .
Buying lots of gold in a struggling economy is a tempting prospect , but you should not be preoccupied with this option only . Do not get carried away . You don’t want to fall in a gold bubble by being over-exposed in gold investment . You should maintain a well diversified portfolio. Are gold iras safe