Gyroscopic Investing

Hello folks.  It's been a good new year thus for for PP'ers and thanks to Harry Browne we can all rest easy in our investments (or maybe it's just me).

So, I'm trying to find a good way to DCA in the PP every month, more specifically into Gold.  I noticed that Kitco has a type of Pool account you can put your cash into and later redeem it for the actual metal (which I believe they'll also store or ship).

With gold prices as they are it's difficult for a working class stiff to purchase a coin a month or every 2 months, and I have to pay a purchase fee to buy more GLD/IAU at Vanguard, so I'm looking for an alternative and Kitco seems to have a reasonable middle ground.

Thoughts?


Link: https://online.kitco.com/help/poolaccount.html

Based on Kitco's information, their Pool Accounts charge a $15 administrative fee for all purchase and sale transactions under $2,500.  (See the last question on their FAQ at https://online.kitco.com/help/faq_bullion_pool.html.)  Then, on top of that, when you've saved up enough to take physical delivery, you're charged the usual buy/sell premium (e.g., around $50 for a 1-oz Gold Krugerrand).  That doesn't seem like the most cost-effective way to DCA into gold.

An ETF like IAU is probably the cheapest way to DCA.  Trades at Vanguard, for example, are $7--less than half of the $15 transactions for the Kitco Pool Accounts.

An option that would allow you to actually have possession of your precious metals while you save up would be to buy some silver coins every month until you have enough of them to exchange for a single gold coin.  This approach isn't as cheap as the ETF approach since you'd effectively be paying the buy/sell premium twice (once for the silver, once for the gold)--plus silver isn't a PP asset--but it has the advantage of allowing you to start taking physical delivery of a precious metal right away, as you accumulate it.

You could just save it as cash and then buy a gold coin when you've save up enough.  Call me old fashioned. 

Or maybe use BuyAndHold.com to DCA into GLD (and other ETFs/stocks of course)? Cheapest there would be $7 for two window trades per month.

http://www.buyandhold.com/bh/en/about/fees.html

Just2trade and optionshouse are two brokers that charge $2.50 and $3.95 respectively to trade.  Interactive Brokers is another low cost equity broker.  Obviously when DCA'ing into any security, it is important to keep your trading costs as low as possible.

Wellstrade offers 100 free equity trade per year, if you have $25k in cash to park in a checking account with them.

SmallPotatoes wrote: With gold prices as they are it's difficult for a working class stiff to purchase a coin a month or every 2 months, and I have to pay a purchase fee to buy more GLD/IAU at Vanguard, so I'm looking for an alternative and Kitco seems to have a reasonable middle ground.

SmallPotatoes, you did not mention how much you wanted to invest at a time in gold, or whether you were investing through a retirement account (Roth/Traditional IRA, 401-K, SEP, etc.) or standard brokerage. 

Tortoise gives a good idea, that is, buying silver and exchanging it for gold after you've accumulated enough. 

You could also buy small denomination gold coins.  They have a higher premium than the one ounce coins--approaching a ridiculously high 20% on one-tenth ounce Gold Eagles when I last checked.  But any idea I can think of will involve counterparties or higher premiums or both. 

Even buying into an ETF or Pooled Account and selling it (or a portion of it) to use the proceeds for buying physical gold involves not only brokerage fees, but also standard or capital gains taxes (which one depends on which ETF/pooled account you buy and when you sell), an additional premium for the coins you're trading for, etc. 

By the time you've transmogrified whatever stash of ETFs, pooled accounts, silver, etc. into whatever gold coins you want you may have paid 20% or more in premiums, fees, and taxes anyway.

My vote:  Buy small denomination, low premium gold bullion coins or silver bullion coins for dollar cost averaging.  When prices go up, you can transform some of them into one-ounce gold bullion coins, if that's what you want.

After checking prices at online PM dealers, call your favorite local coin dealers to see how their prices mesh with your online research.  Pay one of the local dealers a visit, plunk down your greenbacks, and walk out with some real gold coins (or silver if that's part of your plan) in your hands. 

When you get home, kiss them and put them away. 

Thanks for the advice everyone.

I should have mentioned that I have holdings in IAU and GLD for rebalancing purposes, both in my IRA and in my Taxable account.  My company 401k has access to Vanguard funds (VINIX, etc.) useful for the stock portion, and I'm basically all in the PP now.  While I'm still working I just want an efficient way to set aside a bit each month for the PP.

While it's simple enough to purchase more VTSMX or park some cash in VUSTX+EDV until I rebalance into TLT, gold will always have a cost for me because I cannot afford to dump (at present) $1400.00 each month into a gold coin.  Also, it seems pricey to pay $7.00 to invest $100.00 into GLD/IAU every month, but I suppose the $14.99 that Kitco charges isn't any better.

Silver coin or purchasing the 1/4 oz. gold coin each Quarter might be an option, though more costly in purchase price.

I'm still on the fence about how to DCA into gold.  Thus far I've just been setting aside cash every month for Stocks/Bonds/Reserves and a little for gold.  However, I have been considering what others have suggested; that is, purchase small denomination gold coins or even silver for upgrading when I've accumulated enough to purchase an oz. of gold bullion.

Presently, I am setting aside +/- $200.00 each month to purchase whatever asset is lagging when I rebalance annually (or upon hitting a rebalance band).  Of course, I would rather have my investment money... well, invested during that 12 month period.

This is a curious problem since most/many of you have quite a sum of money and are on countdown to retirement.  For me, I've got a good 30+ years before I punch-out for the last time (and I'm not referring to mortality).  While I am okay to use VTI, TLT, and a MM for 3 of the 4 assets, I do like holding as much physical gold as I can, and using GLD/GTU/IAU for rebalancing.

So, those with analytical powers beyond my own, please let me know how you would proceed investing in the PP, and in particular gold, every month on a modest budget.  Thanks.

How about just buy some GLD/IAU/GTU each time you get $1,000 accumulated in cash?

The transaction costs wouldn't hurt you much with this approach.