EFT's

what's the whole deal about ETF's and how or where does one invest in them?

 

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They're like a stock. You buy it, and it typically moves in step with whatever precious metal(s) it represents.

 

I know you can purchase ETFs on Td Ameritrade, But Im sure Scottrade and whatever the one with the baby talking more than likely as well

 

ETrade... you can buy ETF's on pretty much any decent broker.

 

a couple of weeks ago Krispy posted a link to an article describing the serious pitfalls of investing in gold ETFs. After reading the article I never want to invest in PM ETFs.

 

The deal with Exchange Traded Funds (ETF), at least on CT, is that most here will tell you not to invest in them because you can't hold the physical metals in a precious metals based ETF, and that you may loose money in the markets, as if inflated metals prices and physical isn't any riskier. That advice to avoid them may be right for some investors and not good advice for others who may do well to invest in them, provided they fully understand how they work.

There is a lot of information online about ETFs which you should read before taking advice here or elsewhere. You can and should order any ETFs prospectus prior to investing in it to understand each and everyone one individually before investing. Best advice is to discuss ETFs with your investment professional as they can instruct you on how they operate and any tax issues you may face in reaching your investment goals... and I hope you don't tell us that CT is your investment professional of choice for such things.

Take the time to read up on these yourself, watch their moves with the markets and only when you are sure and fully understand them without asking a public forum full of strangers, should you invest anything in them.

 

I can almost see Sam Waterston speaking these words.....

 

Old Sam is a CT member? LOL!... But seriously, Sam's words are all carefully crafted by legal experts for TD to avoid liability issues for what they are advertising. Such is the way of making claims in advertising, disclaim everything to CYA!

 

Krispy, what I'm referring to is the excessive tax, 28%, and the reference to transactions within the fund being taxable events, et al.

I'd like to find the link you posted but don't remember which thread it's in.

 

Hold it to 59.5.......tax rate goes down.

 

hmm... I do recall posting a few times about ETFs, risks and doing one's homework on them as well as not over looking them totally in being diversified in metals, but I'm not too sure how far back that post you are talking about may have been from. I will poke around and see what I can find, if anything. Cloudsweeper may have given some advice and thoughts somewhere too... so it might not have been me. Green18 brings up a good point too!

 

You posted a link to a very informative article about the risks of investing in PM ETFs. At least i think it was you.

 

The anti-metal EFT arguments alway rings weak to me.

"You can't get delivery!" or "They wont show me the metals they have in storage!", hints that said person doesn't understand the tool or wants to regurgitate some drivel they heard on a gold bug podcast.

Example; many use oil EFTs or Asian mutual funds....do you want to take delivery of these? How can they "prove" to you that they have stock on hand from 100+ Asian companies? The answer is the same for almost every single stock,mutual fund, bond or EFT.

Would I personally want to keep my "very rainy day" fund in a metal ETF? No.
Do ETFs play a important, inexpensive and liquid roll in many investment strategies? Yes.
Should you get your financial advice from conspiracy theory radio/blog editors? No.
Will Krispy rip me a new one, taunting me until I regret posting? Likely.


Like most investment vehicles, SLV or GLD (the major metal ETFs) are just tools. Learn and use the tool if it will help you reach your goal, in a balanced and educated way.

PS. You can used stops to limit loses.

 

xtronic: I loved your post!

 

It may also hint that the said person actually read the perspectus which states pretty clearly that some metal ETFs seek to track the price of the metal but do not promise that they actually possess it. So do your own research before knocking folks who are more suspicious than you are. It's just possible that the person selling you the investment knows more than you do when you buy it.

 

http://etfdailynews.com/blog/2010/1...less-than-you-think-gld-slv-iau-dgl-dbs-grow/

Here are some of the highlights but you should read the entire article

"...According to the Internal Revenue Service (IRS), gold is considered a collectible – a capital asset with its own tax rate. This makes it no different from art, antiques, stamps, certain coins, wines, or your favorite single-malt scotch for that matter..."

"...Gary E. Ham of the Beaverton, Ore.-based accounting firm of Jones & Ham P.C., notes that gold does not qualify for the 15% minimum tax bite that many investors consider routine when calculating gains on investments held more than a year (by that I’m referring to long-term capital gains)..."

"...Instead, profits from gold investments are subject to a 28% maximum tax rate if held for more than 12 months. And, if those investments are sold in less than a year, the profits from gold count as ordinary income, which can also be taxed at far higher rates. (And those “higher” rates could become a whole lot higher in the future, depending upon what strategies present and future White House administrations resort to in order to deal with the mounds of debt U.S. taxpayers will be financing for generations to come.)

"...On the bright side, taxes aren’t triggered until there is a “taxable event,” meaning you buy or sell your gold.

It’s worth noting that the same is true for losses in that you can’t use them to offset other taxes if you haven’t actually had a taxable event..."

"...However, the same is not true for investors who chose one of several popular metals exchange-traded funds (ETFs) like the SPDR Gold Trust (NYSE:GLD), the iShares Silver Trust (NYSE:SLV), or the iShares COMEX Gold Trust (NYSE:IAU). Holders of these investments can be held accountable every step of the way.

Precious metals ETFs are set up as something called a “grantor trust,” according to Barron’s and the IRS. This means that ETF investors are treated as owning undivided interests in the actual metal that’s owned by the fund. Therefore, when the ETF sells some of its gold for any reason, investors are liable for gains or losses from the sale. And this has to be reported to the IRS as part of gross income even if a cash distribution from the sale is never received.

There also are wrinkles depending on how an ETF achieves its objectives. For instance, both the PowerShares DB Gold Fund (NYSEGL) and PowerShares Silver Fund (NYSEBS) use futures contracts to mimic underlying direct gold investments.

This means that they fall prey to something the IRS calls the “mark-to-market” method, which stipulates that any futures contracts held at the end of a calendar year will be treated as if they were sold at fair market value. This is called a “deemed sale.”

Where this matters to investors is that each shareholder is then, in turn, liable for his or her pro-rata share of the taxes on the deemed sale even if the underlying asset (the futures contracts the fund owns) haven’t actually been sold..."

 

It often seems to me that some get to the "anarchy is around the corner" or "it's the top of the bubble and we are crashing" extremes , whereas both are unlikely in my opinion at this point. Physical possession is the best for people who do not understand or trust the electronic financial marketplace. But one who does can use ETF's ability to be traded almost instantaneously, utilize the leverage that is built into ETFs ( although this also increases risk), be able to utilize options, from simple call or puts which can be very useful to the knowledgeable investor, to various combinations of options which can allow one to balance their risk/reward tolerance. Physical holders sometimes are not experience and do not realize that in a crisis, they will not be able to buy/sell as quickly as they expect. Knowledge is still more important than gold, IMO.

Jim

 

IRAs holdings seem to be exempt from this taxation.
​

 

Is it exempt or postponed?

 

Praise Jesus.......