Gyroscopic Investing

l2jperry wrote: Hello All,

Continuously reading this board for advice on how to set up a PP. I am a new investor with no experience, other than buying gold coins about 3 months ago.

Here is what I am considering doing and I wanted your opinions/expertise:

Open a Roth IRA at Vanguard and maxing out my 5,500 contribution with...

1.) 2,500 in VT (which will be free through Vanguard)
2.) 3,000 30 Year treasuries (which should also be free through Vanguard)

Next, either open a C.D. through Ally at a little over 1% for a 2 year deal, or purchase t-bills in a brokerage account. I am leaning towards the C.D. - but I am undecided here. The amount would be $2,500.

Lastly, I would move a gold coin out of my previous investment into the PP, at a value of approximately $2,300.

This should leave me at 24.27% Stocks, 29% Bonds, 24.27% Cash, and 22.3% Gold... is this a good allocation to start with? Seems to be the closest I can get with restrictions in buying bonds and gold.

Furthermore, since gold is my lagging asset, I have more gold in my VP that I will transfer over to my PP when needed so that I can avoid having to get into an ETF for re-balancing purposes.

Does this sound good? Am I missing something?

Thank-you for your help.

l2jperry wrote: I believe you are limited to $5,500 in a Roth yearly. Once I need to rebalance I will have to start a taxable account if I do not have enough space left in my Roth.

hoost wrote: On gold, I'm not sure what the current spot price is (joys of the PP, I guess), but is one gold coin really worth $2300?  Seems high.

For cash, I prefer to keep it accessible so that it can be used for emergencies, so I would avoid the CD.  I would keep it in a savings account, or in a TMM or short-term bond fund, or a regular money market, any of which would have check writing privileges.  Personally I use VFIRX in taxable with check-writing privileges.

On gold, I'm not sure what the current spot price is (joys of the PP, I guess), but is one gold coin really worth $2300?  Seems high.

There you go; just goes to show how little I know!  That seems so low -- even if you faithfully contribute the max for 20 years you'd only have 110,000 contributed (and then plus or minus for return), and it seems like it would be hard to retire on that.

Anyway, since this just once a year, I think the plan sounds good.  Movement in the asset values will throw the portfolio more out of balance than the initial contribution imprecision.  And you can combine the once-a-year check for rebalancing with the once-a-year contribution and divvy the contribution out accordingly.  Sounds very simple and nice.

l2jperry wrote:
Does this sound good? Am I missing something?

stuper1 wrote: Consider using Treasury Direct for buying non-IRA T-bills.  And also consider buying I-bonds with cash that is not part of your emergency fund ("deep cash").  I-bond interest is tax-deferred, so it's kind of like a traditional IRA except using post-tax money.  I-bonds will pay as much interest as the CD, but with the tax deferred interest.  You just can't withdraw the I-bond money for one year.

l2jperry wrote:

For cash, I prefer to keep it accessible so that it can be used for emergencies, so I would avoid the CD.  I would keep it in a savings account, or in a TMM or short-term bond fund, or a regular money market, any of which would have check writing privileges.  Personally I use VFIRX in taxable with check-writing privileges.

I will still have savings outside of the PP for emergency funds, also I am 22, no expenses other than car/health insurance, and no debt. So even though you're not making much off of cash anyway, i'd like to put it in something for 1-2 years that will give me the best return, I don't mind a little extra risk. So with that being said, what do you think?