and you need to sell a portion in order to reinvest into other assets, it’s a laborious and costly process. “We like to think we’re in for the
long haul, but we like to be able to rebalance quickly. Sometimes people need to raise cash because something comes up,” Atwill says. “We like to own shares, plus owning some physical gold you keep in a safe place. We certainly promote the idea of doing both.”
GOLD TRUST ETFs AS IRAs
Gold is an important
but instead simply tries to track the movements of gold using unrelated assets that correlate to gold, he explains. The risk is something called
HOW IT’S USED
In a year’s mine production, just over half of the world’s gold goes into jewelry. Much of the rest of the precious metal is sold as physical bars and coins to private investors. Only a tiny fraction is purchased by investment funds, including the popular new exchange-traded funds.
investment right now, says Jonathan Citrin, founder and CEO of Citrin Group, a money management fi rm in Birmingham, Mich. For retirees these days, the biggest risk has little to do with the markets. It’s infl ation that’s the danger, he says. However, buying physical gold
SOURCE: World Gold Council
Technology uses 12%
BEYOND GOLD Commodities as an asset class
Physical bars and coins 35%
can be a good way to hedge, says Elle Kaplan, CEO of Lexion Capital Management in New York. “Since commodities are not correlated to stocks and bonds, you get that nice, instant, extra diversifi cation,” she says. Avoid, however, focusing
on any single commodity, Kaplan advises. Instead, spread your risk by using a fund.
“Index funds and ETFs Jewelry 51%
Investment funds 2%
for an IRA can be diffi cult. IRS regulations require that coins meet a specifi c level of “fi neness” that makes them a currency rather than a collectible. The way to do this right
is to fi nd an IRA custodian who will buy and hold coins or bullion on your behalf, taking care to stay within the law. As for funds, Citrin
advises his investors to use exchange traded funds (ETFs) such as SPDR Gold Trust (GLD) or iShares Gold Trust (IAU), two widely held and very liquid gold ETFs. “The buying and selling
of ETFs inside an IRA is perfectly kosher,” Citrin says. “The problem is buying the wrong ETF.” Sometimes, a fund
claims to be a “gold fund” FEBRUARY 2012 | NEWSMAX MAXLIFE 69 I
UBTI — unrelated business taxable income. “When you get the 1099 for that fund, if it has UBTI on it, you will be taxed on it.” Read the prospectus fi rst and look for language regarding UBTI, Citrin says. “If you pay tax on the unrelated
income, you are defeating the purpose of owning it in an IRA,” he says.
GOLDEN RULE: PLAY IT SAFE
f a self-directed IRA is your sole retirement game plan, non-traditional assets can be an unnecessary source of risk, warns Eric Donner, a financial adviser with Rubin Wealth Advisors in Boca Raton, Fla. “I’m not a big advocate for investing in gold in an IRA because I come from a background of preserving retirement wealth. I’ve worked for years with our clients on preserving safe money,” says Donner.
Investing in gold outside an IRA may make more sense for many people, he says.
Part of the problem with self-directed IRAs is that retirees can overestimate their own expertise regarding investment choices. “Once they roll out and get into a self-directed situation, they tend to think, OK, it’s my money, I can do what I want with it. But my opinion is that they should continue to be prudent,” Donner says. Lean toward extreme caution when investing for your IRA, Donner adds. “It gets back to the prudent investor rule. In my business, we are fiduciaries to our clients. There are diff erent standards. It’s about avoiding excessively risky investments.”
CAUTION USE
IRA at Risk
are easy, low-cost ways to add commodities to your portfolio,” says Kaplan. “Look for broad-based baskets of commodities based on
commodity indices, like the GSCI.” And steer way clear of borrowing
for investments. “With any of the funds, commodities, stocks or bonds, when you add leverage you add risk,” she says. “With your IRA, your safe money, you should not be employing leverage and should not be employing money managers who do that.”
PHOTO ILLUSTRATIONS/ISTOCKPHOTO
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