While market conditions seem great looking in from the outside, there are several serous red flags that are pointing more and more investors away from the market and to precious metals. Today, weâ€™re going to discuss the idea of using a precious metals IRA to hedge against losses. Weâ€™ll also look at a few concerns investors have to see if it is indeed a good time to start a precious metals IRA in an attempt to hedge against losses.
How A Precious Metals IRA Works As A Hedge
Hedging against losses is a simple concept. By purchasing an investment that generally goes up in down times, losses can be minimalized or avoided all together. Historically, in poor market conditions, investors look for safe haven investments as a nest for their money. Precious metals are the type of investments investors look for. As a result, demand for precious metals goes up while supply goes by. The basic law of supply and demand comes into play increasing the price of precious metals; ultimately minimalizing losses in other investments.
Concerns Investors Have About The Market
Oil Oil is one of the major concerns weâ€™re seeing from investors. Over the last few months, weâ€™ve seen the price of oil drop dramatically. So low in fact that many United States shale producers are having a hard time turning a profit and may be forced to close their doors. That could lead to thousands of people unemployed; ultimately sparking a selloff in the stock market.
High Stock Valuations Today, stock values are getting dangerously high. After years of exponential growth, it seems as though stock values are growing at a much faster rate than corporate earnings can keep up with. As a result, investors today are grossly overpaying for stocks. If the majority of investors were to realize that stocks were dangerously overvalued, that could also start a selloff; leading to a market correction.
Geopolitical Tensions While itâ€™s not in the news so much these days, the conflict between Russia and Ukraine over the Crimea Peninsula is still a major issue. Aside from that issue, it seems as though terrorist activity around the world, specifically in the Middle East, is on the rise. As a matter of fact, President Obama recently authorized sending 1,500 more United States troops to join the fight in the Middle East.
Economic Turmoil The Eurozone is currently experiencing tough economic times. The multi-country economy is teetering on the brink of a financial recession. If a financial recession was to take place, it could have a devastating effect on world markets.
Looking at all of the issues mentioned above, as well as the possibility of precious metals acting as a hedge against losses in bad market conditions, the conclusion is simple. Using precious metals is definitely a great way to protect your retirement investments from devastating losses. Opening a precious metals IRA would be a good way to do that. If youâ€™re looking for a way to hedge against losses, we strongly advise speaking with your financial advisor about precious metals.