Gold IRA vs. Silver IRA: Which Is a Better Way To Invest?

silver eagle and golden american eagle one ounce coins

Creating and investing in an independent retirement account (IRA) is crucial, especially for those who may not have access to an employer-sponsored 401(k). Stocks, ETFs, and mutual funds are the most typical types of assets when it comes to retirement account investments.

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However, there are alternatives such as gold and silver. Precious metal IRAs can be a smart alternative for a number of reasons.

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Precious Metal IRAs Can Offer Financial Security

CBS News explained that the key difference between gold and silver IRAs and normal IRAs is that — instead of investing in assets like stocks, bonds, money market funds and CDs — your funds are used to buy gold and silver.

“Primarily, economic uncertainties, including inflation fears and geopolitical tensions sparked by the wars in Gaza and Ukraine, as well as logistical concerns in the Persian Gulf, have driven investors toward ‘safe-haven’ precious metals such as gold and silver,” explained Collin Plume, the founder and CEO of Noble Gold, to CBS News Money Watch.

Not only do gold and silver IRAs offer protection against inflation and turbulent economic times, but they also offer further diversification from stocks and bonds. While precious metals typically don’t offer as high of an annual return as traditional stock market investments, they perform well during economic downturns and periods of elevated inflation.

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Gold IRAs and Silver IRAs Defined

Investopedia defined a gold IRA as: “A specialized individual retirement account (IRA) that allows investors to hold gold as a qualified retirement investment. A gold IRA must be held separately from a traditional retirement account, although rules involving things like contribution limits and distributions remain the same.”

Meanwhile, SmartAsset defined a silver IRA as: “A self-directed individual retirement account that allows you to own silver and other precious metals in your portfolio. Investors sometimes use this type of account to hedge against inflation.”

Pros and Cons of Gold IRAs

Pros

• Gold offers long-term wealth preservation.
• The price of gold is less volatile than the price of silver.

Cons

• There’s a higher barrier to entry to invest in gold than there is to invest in silver.
• Gold is used less often in manufacturing than silver.

Pros and Cons of Silver IRAs

Pros

• It costs less to invest in silver than it does to invest in gold.
• Silver is used more often, especially in electronics and electric vehicle manufacturing, which adds to its value.

Cons

• The price of silver is usually more volatile than the price of gold.
• Silver doesn’t offer as much long-term wealth preservation as gold does.

How To Know if a Precious Metal IRA Is the Right Choice For You

If you’re looking for further diversification of your assets, particularly in turbulent economic times and high inflation, both gold and silver IRAs are a good idea. If you’re hesitant, consider a mix of both gold and silver which can provide a balanced approach. A common rule of thumb is to invest around 5% to 10% of your portfolio in precious metals.

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This article originally appeared on GOBankingRates.com: Gold IRA vs. Silver IRA: Which Is a Better Way To Invest?