“Best IRA Investments” Lists Rarely Include Precious Metals
Posted By | October 28, 2017
If you search online for “best investments for an IRA,” what do you suppose you’ll find?
I ran that very search the other day, curious to see what it would reveal, and my suspicions were confirmed: nothing but information on equities – stocks, mutual funds, and exchange-traded funds (ETFs).
Take this one search result, for example – it’s an article from The Motley Fool website, written earlier this year and actually titled “The Best Investments for an IRA.” Check out the first sentence:
“An IRA is a fantastic way to build long-term wealth, but it can be tricky knowing which stocks or ETFs are best to own in one.”
The article’s very first idea reveals what I believe to be an unfortunate assumption made by not just the writer of that article, but so many financial experts. Namely, that the best IRA investments can come only from the universe of equities. By taking that perspective, an investor runs the likelihood of avoiding assets capable of providing the kind of effective diversification to a portfolio that can optimize performance over the long term.
Effective diversification goes beyond the mantra of “Don’t put all your eggs in one basket.” It involves more than just ensuring you own different types of equities, or even entirely different asset classes, just because they’re different from one another. Effective diversification requires going even further, and making certain that each asset class you own to help achieve diversification has a low correlation to the others.
It’s an important concept. For example, while real estate is clearly a different asset class from stocks, this correlation matrix reveals that the investment performances of real estate and the stock market are closely aligned. With a correlation coefficient of .75 (+1.00 represents complete correlation, while 0 signifies that assets are completely uncorrelated), we may conclude the prices of real estate and equities tend to move very much together. And that’s most certainly not genuine, or effective, diversification.
That said, you will also notice from the same matrix that gold, one of the few genuine stores of value, is almost entirely uncorrelated with the stock market, with a coefficient of .04. That is an example of effective diversification.
Accumulating the “best” investments for an IRA involves more than just searching among high-flying equities. In my opinion, the best IRA investment choices for a retirement portfolio include assets that offer the potential to stabilize your stocks and funds, and thus help preserve capital during periods of significant volatility in the stock market – assets such as gold and silver.
If you think it might be time to look more closely at whether gold and silver should be a part of your portfolio of best IRA investments, then I invite you to give the team at Augusta Precious Metals a call at 855-242-4121. Let us help you in your effort to achieve the kind of portfolio diversification that could be truly beneficial.
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