Newbie wanting to start a PP - Help!

[Jsquared83]

Hi everyone, new to the board. Been doing research on the PP now for a few weeks and the more I read about it, the more I realize my finances are all over the place and in need of some help. I have a pretty small amount to invest, about $8k. I'm 29 y/o btw. Right now, I have about $1500 in a capital one sharebuilder account, $1500 in physical silver and $5000 in cash, literally. I've been sitting on mostly cash for a while now trying to figure out the best vehicle for it and I think I've found it.

My question to everyone here is, how I should get started? What beginner steps should I take? I see all this wealth of knowledge and experience and I'm a little overwhelmed and no quite sure where to put my hands first.

Thanks for your help!

-Joe

[dualstow]

Wow, that's a lot of silver as a % of your total. I'd sell it now if it's above breakeven.
Does anyone disagree?

[l82start]

its a high % of total, but a small to reasonable SHTF quantity of silver,  would say "to sell or not to sell" depends on why he has it, the above/below breakeven, and how fast he can contribute to the PP without touching it if it is held for some reason other than speculation..

[Jsquared83]

I'm about even with the silver. Started buying last summer/fall about 2 oz a week, treated it as a savings account. I bought into the "silver is way undervalued", "silver is going to $40 by year end" hype. I partially believe those things, however my reasons are just speculative. I haven't bought silver in over a month, mainly been focused on building some cash.

[l82start]

silver might do those things, or it may not, or it may be inevitable but you will wait years to see it..... if you are getting into the PP to get away from speculating then by all means sell it to fund the PP, break even isn't bad....

some of us (myself included) keep a small prepper supply of silver bullion/junk silver coin, but if you don't need silver to cover "bad times" (and many PP investors considered gold to be enough protection for that) then having that money available will make starting a PP easier. having less than 10,000. can make a 4x25 do it your self portfolio trickier, but you are very close to being there...

[whatchamacallit]

I am pretty new to the PP as well but here is what I would do.

First, I would check out this website for capital saving tips:
http://earlyretirementextreme.com/

As far as allocations:

Stocks:
Does your job offer a 401k match? If so, I would contribute at least enough to get the full match. I would use this as your stock market allocation. Cheap stock market index funds are readily available in 401k programs.

Gold:
Sell your silver and buy a gold coin.
Maybe there is a local dealer, otherwise you would have to pay shipping.
http://www.usmint.gov/mint_programs/ame ... ion=lookup
www.goldmart.com

Bonds:
This is controversial but while you are accumulating, I would buy EE bonds until 30 year treasuries are over 3.5%.
http://gyroscopicinvesting.com/forum/ht ... ic.php?t=4
http://www.treasurydirect.gov/indiv/res ... _bonds.htm
The hard part is calculating the value of your bond.
http://www.free-online-calculator-use.c ... calculator

Cash:
Open an account with the biggest most convenient credit union available for operating funds.
Buy I bonds with cash you won't need for a year.
http://www.treasurydirect.gov/indiv/res ... ibonds.htm

[Pointedstick]

Welcome! Here's my recommendation:

1. Sell the silver, buy a gold coin.
2. Open a Roth IRA with Schwab.
3. Contribute the $5,000 cash into the Roth IRA for the 2012 tax year, which you can do until April 15th, so hurry.
4. Take the money in your Sharebuilder account and withdraw $1,000, then contribute that to your shiny new Roth IRA for tax year 2013. Now your Roth IRA will have $6,000 in it.
5. In the Roth IRA, buy the following:
$2,000 worth of SCHB (commission-free stock index fund ETF)
2 $1,000 30-year bonds
2 $1,000 1-year T-bills

Now you have a fantastic PP that generates zero taxes! But you're a bit underweight gold. Take the remaining $500 in your Sharebuilder account and set that aside. Whenever you have more money to contribute, put 1/4 aside and buy another gold coin with it when you have enough. Put the remaining 3/4 in your Roth IRA and buy more of the stuff in there when you have enough. Good luck!

[Tom]

I would stray away from putting a stock fund in your roth IRA.  Unless it earns you heavy dividends, you're not going to get taxed on stocks until you sell.  You can avoid this by just contributing to the losing asset classes each month and avoid having to sell to rebalance.

You'd be better off for tax purposes to max out your roth IRA with regular interest accruing assets like bonds and short term t-bills for the cash portion.  Open a regular brokerage account to purchase your stock index fund and keep it there.

[Pointedstick]

I would stray away from putting a stock fund in your roth IRA.  Unless it earns you heavy dividends, you're not going to get taxed on stocks until you sell.  You can avoid this by just contributing to the losing asset classes each month and avoid having to sell to rebalance.

You'd be better off for tax purposes to max out your roth IRA with regular interest accruing assets like bonds and short term t-bills for the cash portion.  Open a regular brokerage account to purchase your stock index fund and keep it there.

I think this over-complicates things. One could just as easily say to not waste tax-sheltered space with T-bills that are yielding basically nil. And those stock funds are yielding about 2% right now. Furthermore, rebalancing out of stocks will incur a heavy tax bill if stocks have appreciated a lot (like, say, right now). So if anything, I'd think a stock fund would be a better candidate for tax sheltering.

[melveyr]

Yeah some people make the argument to put the highest expected returning asset in tax deferred (like EM equities or something).

It's tough to come up with the perfect answer so I think just using the space is 90% of the battle.

[notsheigetz]

Yeah some people make the argument to put the highest expected returning asset in tax deferred (like EM equities or something).

Actually, that sounds backwards to me but maybe you meant tax-exempt since he was talking about Roth.

[rocketdog]

Welcome! Here's my recommendation:

1. Sell the silver, buy a gold coin.
2. Open a Roth IRA with Schwab.
3. Contribute the $5,000 cash into the Roth IRA for the 2012 tax year, which you can do until April 15th, so hurry.
4. Take the money in your Sharebuilder account and withdraw $1,000, then contribute that to your shiny new Roth IRA for tax year 2013. Now your Roth IRA will have $6,000 in it.
5. In the Roth IRA, buy the following:
$2,000 worth of SCHB (commission-free stock index fund ETF)
2 $1,000 30-year bonds
2 $1,000 1-year T-bills

Now you have a fantastic PP that generates zero taxes! But you're a bit underweight gold. Take the remaining $500 in your Sharebuilder account and set that aside. Whenever you have more money to contribute, put 1/4 aside and buy another gold coin with it when you have enough. Put the remaining 3/4 in your Roth IRA and buy more of the stuff in there when you have enough. Good luck!

+1

[sophie]

I'm with Pointed Stick.  Feed the Roth and sell the silver.  As your Roth grows, you might want to add a gold ETF up to 1/3 of the total allocation, for rebalancing purposes.

Do you have a 401K or equivalent at work?  Make sure to put that to work too, at least up to the company match.  You should be able to use it for stocks and cash at least.

[Pointedstick]

I'm with Pointed Stick.  Feed the Roth and sell the silver.  As your Roth grows, you might want to add a gold ETF up to 1/3 of the total allocation, for rebalancing purposes.

Yes, absolutely! That's why the Roth IRA should be with Schwab: SGOL is commission-free.

[rocketdog]

That's why the Roth IRA should be with Schwab: SGOL is commission-free.

It is?!  Geez, I have my Roth IRA at Schwab so you'd think I'd already know that.  Thanks for the heads up!

[Tom]

Like I said, "I would stray away from putting a stock fund in your roth IRA.  [b]Unless it earns you heavy dividends,[/b] you're not going to get taxed on stocks until you sell.  You can avoid this by just contributing to the losing asset classes each month and avoid having to sell to rebalance."

I would stray away from putting a stock fund in your roth IRA.  Unless it earns you heavy dividends, you're not going to get taxed on stocks until you sell.  You can avoid this by just contributing to the losing asset classes each month and avoid having to sell to rebalance.

You'd be better off for tax purposes to max out your roth IRA with regular interest accruing assets like bonds and short term t-bills for the cash portion.  Open a regular brokerage account to purchase your stock index fund and keep it there.

I think this over-complicates things. One could just as easily say to not waste tax-sheltered space with T-bills that are yielding basically nil. And those stock funds are yielding about 2% right now. Furthermore, rebalancing out of stocks will incur a heavy tax bill if stocks have appreciated a lot (like, say, right now). So if anything, I'd think a stock fund would be a better candidate for tax sheltering.