What’s your question? let me know and I’d answer it This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Q:  I keep hearing about gold.  Should I cash out some of my investments and buy gold?

A:  For most people, the answer is a resounding “yes.”  As the value of paper currencies of countries around the world fall, gold continues to rise.  For 5000 years, gold and silver have been MONEY, and it has only been since 1971 (putting us in a 40-year experiment) that NO world currency is backed by any tangible asset or commodity.  We believe strongly that gold will continue rising until a major world currency is once again backed by gold and don’t think that will happen until gold has reached a much higher price -- $5,000 or higher.  As currencies, including the US dollar, continue to lose purchasing power, gold will preserve it.

Q:  How do I buy gold?

A:  Gold can be purchased through major brokerage firms in the form of ETFs (exchange-traded funds); GLD and IAU are two popular US-based ETFs.  For ‘paper gold,’ we actually prefer GTU, a Canadian-based fund, for several reasons.  However, our top and strongest recommendation is to hold gold bullion (in physical form).  Family Business Office works through wholesale bullion dealers, where we can buy for less and enjoy rapid deliveries.

Q:  What should I look for in a financial advisor?

A:  We recommend that you emphasize two things: knowledge and integrity.  Investing is complicated – there is a LOT to learn – and few advisors with less than 15 years of hands-on experience can be counted on to provide top-quality planning and investment advice.  (In our opinion, less than 10% of practicing advisors can be relied upon.)  The other crucial ingredient for a financial planner should be a primary concern for the investor, rather than for him/herself.  Fortunately, an increasing number of financial planners, including CFPs and members of NAFTA, hold themselves to this higher standard.

Q:  How much does a financial advisor cost me?

A:  Investment managers generally charge in one of two ways.  “Registered representatives” work for a commission; their compensation is a direct result of the number of "trades" (purchases and sales) they make on an individual account.  Your cost is a direct result of the number of their trades: the more trades, the higher the cost.  Fee-only or fee-based advisors charge either according to the amount of assets managed, or on a flat-fee basis.  Family Business Office, a fee-only advisor, prefers to operate on a flat fee basis, pre-agreed to by the client, with an annual maximum of 1% of assets managed applying to accounts of less than $200,000.  Above $200,000, the fee percentage is lower than 1%.

Q:  What kind of return can I expect?

A:  You return should at least keep pace with the increased cost of living.  To do this today requires investments in "real assets," i.e. assets you can touch and feel, such as timber, oil, metals and grains.  These assets are presently in a "secular" bull market.  Family Business Office has produced returns for our average client of 21% in 2010 and 51.1% over the five-year period ending December 31 2000.

Q:  How can I protect myself from the sinking value of the dollar?

A:  The decline in the dollar's purchasing power can be easily verified at the gas pump and in the grocery store.  These higher prices for "commodities" (things you can touch and feel) are evidence of "inflation" (higher prices).  In this "real assets" era, to protect yourself from the declining value of financial (or paper) assets such as the dollar, you should hold a good portion of your wealth in these real assets – such as precious metals, real estate, and proxies for other "hard" assets such as oil, copper, wheat, etc.

Q:  How much money do I need to retire?

A:  Conventional financial planning says that you can retire comfortably if your personal retirement savings totals 20 to 25 times the value of the annual distribution you will need to take.  For example: if in addition to Social Security and payments from a company pension, you will need to withdraw $25,000 per year to sustain your desired lifestyle, you should have $500,000 (20 times) to $625,000 (25 times) in accumulated retirement savings.  This scenario is oriented toward ensuring that you will not outlive your investments.  If you are willing to "gamble" and run the risk of "dying broke,”  you can get by on less.

Q:  How do I plan for my children's college?

A:  Disciplined, regular deposits into an account for each child is recommended.  The first contributions should go into a “Coverdell” account, and the remainder into a “UGMA” or “UTMA” account.  Any shortfall against actual future costs will need to be made up from your income or other savings.  We do not recommend investing in "529" plans, due to the generally poor investment selections that are available.  Beyond that, serious questions are being raised about the value of a college education; feel free to ask us for details and references regarding this development.

Q:  Can I borrow from my 401(k) without penalty?

A:  Most 401(k) plans allow the participant to borrow up to the lesser of $50,000 or 50% of the "vested" account balance, without a penalty.  The borrower is charged a market interest rate, but pays the interest to himself.  Therefore, this is a no cost loan – which can be used to convert taxable savings into cash.  Note however that a 401(k) loan contains "traps."  In addition, employees who are at least 60 years old have an ability to transfer savings out of a company 401(k) into an IRA, where they may have greater investment latitude.

Q:  What is the difference between an IRA and a 401(k)?

A:  401(k)s are sponsored by US companies and allow employees to make tax-deferred contributions toward their retirement into a pre-determined (by the employer) menu of investment choices.  IRAs are individual retirement accounts established by individuals for retirement purposes.  Government regulations allow individuals to contribute more during a calendar year to a 401(k) than they can to an IRA.  IRAs generally offer a wider selection of investments and greater withdrawal flexibility.

Q:  What are pork bellies and why do people buy them?

A:  Pork bellies are an extreme example of the range of commodities traded over commodities exchanges.  The COMEX (Commodities Exchange) also trades gold, silver, wheat, sugar, crude oil, and many other commodities.    An individual who buys (or sells) a contract for pork bellies is speculating that the price of hogs will go up or down over a specified period of time.  Since commodity trading is done by full-time brokers and individuals with extensive experience, it is no place for amateurs.