In his book, “Carrying The Fire,” Mike Collins, the command module pilot of Apollo 11, reckoned on their historic journey to the moon and back, the spacecraft was completely off course over 80% of the time. The on-board computers (which had less punch than an iPhone does today) and astro-navigation systems, had so many variables to cope with, they actually confused themselves and stopped working.
Apollo 11 made it, of course - but it was down to Collins manually using a mix of old-fashioned, line of sight observation, and a marine sextant (which was a modern version of the sort originally used on 16th century galleons) which ultimately got the crew to the moon.
Investing, these days, is much the same. There are so many variables and so many things to take into account. Read through the financial press and you will quickly get confused and lost. Couple this with trying to find out the truth from the lies, and the task is made even harder.
All too often, we just lazily rely on mutual fund managers and investment house know-how, to look after the biggest investment decisions of our lives. We have no idea how these people work - or how they are paid.
One of the major problems, in navigating pension funds, is the percentage of charges taken from the fund, and the way in which these charges are taken.
In the same way going off course by a few degrees will take you in the wrong direction - taking three or four percent off of an investment fund will kill your returns.
In a managed pension fund there is no ability to alter course if you need to. You just have to sit there - ride out the journey - and 25 years later, find yourself in a financial desert, rather than the oasis you thought you were aiming for.
The majority of people bury their heads in the sand, and ignore this problem. They tend to regard these charges as the price they have to pay to participate in the pension fund in the first place.
It doesn't have to be this way though.
Sometimes, all it takes is some common sense, and a broader look at the markets, and the investment instruments you're using (and relying on) then making, what the astronauts would call, “a mid-course correction.”
For many years now, it has been possible to have your own sextant, in the form of a self-directed IRA.
Self-directed IRA’s allow you a full range of investment options - from precious metals or real estate, to individual stocks and bonds - many more investment options than a 401k plan, which only cover mutual funds.
With a self-directed IRA you are free to make your own investment choices, and can move in and out of markets whenever you choose. You can map out your own course, and follow it, knowing you have full control over all of the decisions.
Most people are aware you can buy gold and silver bullion, and coins. What many are not aware of, is the ability to add precious metals to a self-directed IRA, and gain tax-free profits, tax deductions, asset protection, and estate planning advantages, by doing so.
This is, in effect, giving you a government discount for using such an investment vehicle.
The most attractive aspect of using precious metals self-directed IRAs though, are the low annual charges. These are typically a flat fee, or set amount (rather than a percentage of the holding) depending on the custodian, and the depository in which the metals are held.
Most pension fund charges are taken as a percentage of the holdings - and can easily become 2% to 3% of the annual investment alone. This is a lot to recoup.
Making The Move
To give an example, one of our clients moved a considerable amount of money out of a pension fund which had been losing money for many years and we assisted him by moving his account into a self -directed IRA which was backed by precious metals.
We discovered his pension provider was charging almost 4% per year! This was the reason his account was not growing.
He moved the funds into metals last year, and has seen gold move up almost 8% since then.
By using gold as his base, he is charged a flat rate for storage and custodian fees, and is now able to keep the gains he is seeing in metals.
One of the major advantages of having gold and silver in an IRA, is the ability to hold the metals separately from any of the other funds. In most pension situations everything is bundled together. Precious metals are one of the only tangible investments a client owns outright.
It might be time to get an updated map ...
Plotting a new course to your financial freedom could be the smartest move you ever made.