Gold not a shiny investment option

0 Comments | Oakland Tribune, Jul 30, 2006

Q:IS IT a good idea to invest in the gold market? Should we put say 10 percent to 20 percent of our stock market assets into gold coins? -- G. R., Hayward

A: I wouldn't, but I don't have gold fever. But to medicate your case, try a $5,000 dose of U.S. Global Investors Gold Shares, a gold- lined mutual fund. It sports a good 10-year record, jacked up considerably by the recent soaring price of gold. Check it out under its symbol, USERX, via finance.yahoo.com or call the San Antonio- based fund at (800) 873-8637. There's no front-end sales charge, but it imposes an unusually high annual fee of 1.96 percent.

The recent spike in gold prices, hitting a 26-year high of above $600 an ounce, has brought the gold bugs out of the woodwork. They cite gold as a haven against inflation, a weak dollar, political turmoil world-wide and anything else that comes to mind.

Mostly, the bugs want you to take gold coins off their hands. If you want to go that route, shop around among coin dealers, be wary of their mark-ups, and be ready to sell off your coins before the price drops because it may drop and not recover for another 26 years. Also, you have to store the coins in a safe place, like a bank safe deposit box. I hate investing in something I can't lift.

Q: In January, you wrote about an emerging markets stock fund and I bought in and I've been watching its price every day. It did well for a long time and now it has taken a dive. I wanted to make a quick buck, but I didn't. -- S.R. Livermore

A: I normally shun foreign stocks and bonds, but emerging markets, those economies that are responding vigorously to the spread of capitalism, were on an upward swing earlier this year, so I tossed readers a bone in the form of T. Rowe Price Emerging Markets Stock Fund. Its net asset value caved in May as a result of investor flight in the wake of worldwide political problems and analysts' fears that rising interest rates would stunt economic growth.

The fund still carries a good long-term record and it should be held for just that, long-term. For those who don't know, it takes $2,500 to enter this no-load, low-fee fund. Call (800) 638-5660. No investment should be tracked every day, and one that offers a quick buck is likely to take that buck back even quicker.

Q: I retired in 1998 and transferred the $23,960 in my employer's 401(k) to an IRA in a mutual fund called George Putnam Fund, Class B. Today my value is about $30,000. This allows me to draw out about $750 a year, which is a lot less than I expected. There must be a better way to get a higher and safer return from my money. What are my chances? -- K.F., Fremont

A: I don't think I have to tell you that you picked the wrong fund. Putnam Class B is a no-load fund, but it carries a high annual fee of 1.73 percent. I don't know what its long-term record was back in 1998, but its record today, going back 10 years, is paltry compared to many other funds. On top of that, it was a mistake to put all of your money in one fund.

Apparently, you are not familiar with my No-Load StockMutual Fund Honor Roll, which includes Ariel Fund, Fidelity Value Fund, Muhlenkamp Fund, Royce Pennsylvania Fund, Third Avenue Fund, and T. Rowe Price Capital Appreciation Fund.

The only one that has stumbled since the roll was updated in February is Muhlenkamp.

If you open an account at Scottrade -- (800) 619-7283 -- you can fold into Ariel and Muhlenkamp for no fee; and you can fold into all of the others, except Fidelity Value, for an initial outlay of only $17.

You may have to make switches after next February's roll comes out.

Cliff Pletschet's Personal Finance column appears Friday and Sunday. Send a general-interest question to him at P.O. Box 28147, Oakland, CA 94604; or phone (510) 531-5620. State your name, city and the question in brief form. Also, visit http://www.investment- educator.com.