Is It Too Late to Invest in Gold?

For the past 10 years, gold has been surpassing expectations. It had dropped to $272 an ounce in 2000, and, at the time, few thought the price would rise dramatically. But over the past decade the price kept rising – breaking records – until it hit a high of $1,226 in December 2009. With each new record, many observers predicted that the price could not possibly go much higher and that the bubble would burst. As of this writing, the price has dropped to $1,092, with many analysts saying that the bubble has finally burst. But that has been said many times in the past decade, only to be followed by another rally.

Back in 2000, those who predicted higher gold prices were envisioning a worsening economy, which usually drives up the value of gold. It is the standard investment that many turn to for security in uncertain times.

Quite often the price performance is the inverse of the stock market’s, which does better in a stable environment. Some say now that the economy appears to be steadying, gold prices should stabilize or drop. In fact, many financial advisors caution against jumping into the precious metals market, fearing a plummet. Even some of those who previously encouraged precious metals investing are backing off these days.

“It was great to get in about three or four years ago, but now you have to be much more cautious,” Cary Carbonaro, a financial planner with Stonegate Wealth Management of Clermont, Fla., told the Orlando Sentinel. “It has had a huge run-up, but it is a cyclical thing.”

Even George Soros said, during the World Economic Forum in Davos earlier this year, “The ultimate asset bubble is gold,” but then, according to reports, doubled his own investment in gold a month later. That could be because he foresees an increase in inflation, which also drives up the value of gold.

Those who want to jump on the golden bandwagon are advised to be cautious in taking that leap. Even the most enthusiastic advisors still say investors should put only a small percentage into precious metals – 5 to 10 percent of their total investment money at most. Also, most advise their clients to invest in a fund rather than buy the metal itself, mostly for security reasons. After all, what’s the use of an insecure investment meant to bring security in an insecure time?

Posted on May 1, 2010 Read More

How Much of an Impact Does Health Care Really Have on the Economy?

Some might turn to mutual funds, which would pool huge sums of money and invest it across many industries and types of investments. One fund can include stocks and bonds. Another type is a subcategory fund that might only have stocks and maybe even only focus on a particular industry. Individuals have a vast universe of funds to choose from to match their risk tolerance and investment preferences.
Some people might like the idea of the mutual fund but not the lack of control. They don’t want to just set it and forget it.
For them, exchange-traded funds offer an acceptable hybrid. ETFs can be thought of as a mutual fund that trades like a stock. Like an index mutual fund, an ETF represents a basket of stocks that reflect an index such as the S&P 500. But it can be traded on a stock exchange, just like a company. ETFs combine the benefits of a mutual fund’s investment diversification and low operating costs with the trading flexibility of individual stocks. Investors can short-sell ETFs, buy them on margin and purchase only one share, just like a stock.
ETFs have grown in popularity very quickly since they were introduced in the early 1990s. The first successful one was an SPDR fund, managed by State Street Global Advisors. The acronym came from the first fund, the Standard & Poor’s Depositary Receipts (SPY), which is also reportedly the biggest ETF in the United States. State Street now manages many SPDRs.
Now hundreds of ETFs are trading on the market, tracking a wide variety of sector-specific, country-specific and broad-market indexes. Some investors also like ETFs for their transparency; they are required to reveal their holdings on a daily basis, unlike mutual funds, which only do so periodically.
Whatever the reasons, it is clear that people like them, because ETFs have grown tremendously during the recession. ETFs now have more than $1 trillion invested in them, according to a BlackRock report in January. The assets under ETFs’ management worldwide grew by 45.2 percent in 2009 alone. That momentum does not appear to be slowing down this year.

Posted on April 1, 2010 Read More

Maximizing IRAs That Are Inherited by Non-Spousal Beneficiaries

One main difference between an IRA account inherited by a spouse and one inherited by a non-spouse is that the spouse can roll it over into either an existing or a new IRA account and continue contributing to it. If the spousal beneficiary is below the age of 59½, he or she can take funds from the inherited IRA without paying a 10 percent penalty for early withdrawal.

Previously, non-spousal beneficiaries had no other option but to take a lump sum distribution from an inherited account and pay the tax consequences. This is no longer the case. Under the Pension Protection Act, a non-spousal beneficiary can also roll over an inherited account, but only directly (trustee-to-trustee transfer) to a new IRA account. The non-spousal beneficiary will not be subject to taxes on the inherited IRA until he or she receives distributions from the account.

However, the new account cannot be in the non-spousal beneficiary’s name, and the beneficiary cannot make any contributions to the inherited IRA. For instance, the new account could be in the deceased IRA account owner’s name: John Smith, deceased, IRA f/b/o Jane Anderson (beneficiary).


The direct rollover must take place by Dec. 31 following the year of the death of the IRA account holder. However, if the inherited IRA has a stretch option, the rollover can occur anytime after the account owner’s death  - as long as the non-spousal beneficiary took out the required minimum deductions.

In the case of a non-spousal beneficiary, any required minimum distributions made by the deceased owner are deducted from the total amount that may be rolled into the new IRA. If the owner of the IRA died before making the required minimum distributions, the IRS may use either the five-year rule or the life expectancy rule to determine how much must be taken out before rolling the remainder into the new IRA.

The IRS rules that apply to inherited IRAs and rollovers are complicated, and it’s best to consult an accountant or financial planner.


Posted on March 2, 2010 Read More

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