Thursday, December 2, 2010

Rosland Capital, Gold Coins, IRAs and ETFs. Oh My!

I keep hearing radio commercials and seeing television commercials for Rosland Capital Gold investments...

Gold coins!
Gold in your IRA!
Gold dust to sprinkle on your krusty-o's for breakfast!

I love goooold!
Ok, I made that last one up. But it seems like gold is the new .com or the new mortgage backed security or maybe it's here to stay. No one can answer that question for sure, and anyone who says they can is selling something, but here are some things to think about concerning gold as an investment.

Gold in your IRA.

The Tax Payer Relief Act of 1997 made it possible to add precious metals (like gold) to your IRA account. It's a great idea - in moderation. I mean, diversification is  a good thing but anyone putting a majority of their portfolio in gold is insane (in my opinion). Gold typically goes in the opposite direction of stocks, but these days are anything but typical and any more than 5-10% of your portfolio is far too risky.

ETF, bullion or coins?

Anyone can invest in a gold ETF in a standard IRA. You can invest in an ETF that tracks the price of gold, like the SPDR Gold Shares (GLD), or an ETF that holds mining stocks, like Market Vectors Gold Miners ETF (GDX). But not all IRA accounts offer the option to hold Gold bullion and coins, although I suspect many more do now than 10 years ago. This is where  companies like Rosland Capital have traditionally found their niche.

Many brokers didn't bother much with precious metals a decade ago since their wasn't as much demand compared with stocks and there are extra regulatory considerations when offering gold in IRAs. For instance, gold coins must be at least 99.5% pure gold to be approved by the IRS for use in IRAs. They also have to be branded as legal tender. The only gold coins that currently qualify for IRAs are the Canadian Gold Maple Leaf , the Perth Mint Lunar series and Kangaroo-Nuggets from Australia, the Austrian Philharmonics and of course the American Gold Eagle featured so prominently in that Rosland Capital commercial.

Whether you invest in mining company stock or bullion or coins, there is risk involved. It's just different for each kind.

The price of gold per ounce, 1973-2010
For instance, investing in mining company stock carries the same risk as investing in any stock. Gold coins and bullion carry the risk that the value of gold will decline below the investor's purchase price, but unlike a company stock gold will never become entirely worthless.

Another factor to consider when investing in gold is fees, as FMF points out. To be fair, he's talking more about liquidating your physical gold stash than your IRA holdings, but unloading the metal may be more difficult than unloading a stock if things turn around and there are more sellers than buyers.

Everyone has an opinion on investing in gold. Leave yours in the comments. :)


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