If you are thinking in investing physical gold IRA, you are in a relatively rare company. Most people who invest in IRAs tend to invest in stocks. While they would put a little bit of their holdings in physical gold or gold ETFs, for the most part people who invest in IRAs invest in stock. This should not be surprising.
It is too easy to get tempted by the really awesome returns of stock markets, specially during a bull market. There is a global bull market currently with Dow Jones establishing a record almost on a monthly basis. This is shared by other emerging markets like the Philippines, Thailand and Turkey. There seems to be a general euphoria regarding stock investing currently. The dark side to all this, of course, is that economic reality must keep pace with stock market performance.
In other words, the general health of the U.S. economy, the Philippine economy, any other economy that has a stock market must form a bedrock of support to whatever inflated value there is in the equities market. If these two factors become too widely separated or become too widely disjointed, a stock market correction is the inevitable product.
This is not a guess. This is not an opinion. This is reality. If you look at all past stock market crashes, there is always a period of extreme growth and extreme speculation.
Things reach a very unsafe level when people start borrowing money just to play the stock market. Most of this borrowing is often fluid and can only be seen in terms of aggregate borrowing. However, if things go horribly wrong, it can be felt by the greater economy.
When people speculate, they think they are the only ones affected but their default actually impacts the rest of the investment community and general market confidence. One default can quickly multiply. According to many reports this is precisely what is happening to the global stock market currently.
A lot of this speculation is made possible through margin investment. A stock margin works this way, if you have one million dollars with your broker, depending on the limits set by your broker, you can borrow possibly five hundred thousand dollars.
So, you can buy stock with one point five million dollars worth. As you can probably well imagine, this can lead to all sorts of risky behavior. People are playing with money they don’t really own. This feeling of ‘free’ investment money leads to people taking riskier bets.
People are trying to pay back the interest of that loan as quickly as possible and this can lead to all sorts of risky investments. It is this irrational speculation driven investing in physical gold IRA accounts that can protect you from.
One of the main ways investing in physical gold IRA can help you in your overall strategy is that, at the very least, it acts as a form of insurance. Even if you have, like the vast majority of your investment portfolio, devoted to stocks, equities and high yield corporate bonds, if the market crashes bad enough, your twenty-five percent or thirty percent hedge in physical gold IRA can protect you from bankruptcy. Why? If your stocks crash hard, your gold IRA rollover value spikes up as well.
If the market crashes badly enough, and gold spikes are high enough, you might end up on a dollar-for-dollar basis even for the year. This is a big deal. While most investors would, of course, like to come out ahead, considering the financial carnage, everybody else suffered breaking even in the equities market by investing in a physical gold IRA is definitely good news. This is definitely a great scenario.
As any newbie stock investor knows, you only really loose in the stock market if you liquidate your stock holdings. For most retail stock traders this is a non-issue. Why? Most of them buy their stock on margin. In other words, they are basically buying on credit.
They are forced to sell when there is a stock crash. However, if you are a disciplined trader and you only spend the money that you actually have, instead of borrowing money to invest in stock market, you can hang on to your loosing positions until the market reverses itself. Look back at the most recent crash in 2008. The stock market took a beating in 2008. However, people who hang on to their stocks are actually making money now, six years later. Why? They did not sell. The only sure fire way to loose in the stock market is to liquidate your holdings. If the market crashes and then you sell all your stock, you are basically locking in your loss.
What a gold IRA does is that its inflated price, after the stock market crashes, gives you enough liquid cash for you to scoop up temporarily depressed blue chip stocks. This is a solid gold trading position. By using gold, not just to ensure you against stock market losses, you can actually use your gold IRA account as a means of giving you the funds you need to take advantage of depressed stock markets. (See: Ordering a Gold Investment Kit) Make no mistake about it. There will be a great stock market crash in the future. It is guaranteed. Why? That is just the behavior of stock markets. After a sustained long period of massive speculation, there will be a time where the accounts come due and the chickens come home to roost. That is just the bottom line.
At some point the performance of the stock market far outstrips the underlying economic performance of the general economy and there is a reality check at some point in the future. That’s the way it has been in the past and that’s the way it will be in the future. You can definitely go a long way in protecting your assets by investing in physical gold IRA while gold is still suffering from a temporarily depressed price.