[Captain's Log]

Stoolies : I'm considering taking a loan from my 401K to buy some gold and silver coins. Interest rate is 5.8% which you select a pay back time from 1 year to 5 from your salary - A portion of the payment services the loan, the rest goes to 401K as normal. (I'll select 1 year).

My logic is that by doing this I will be holding about 10% of my 401k in physical metal instead of paper.I won't pay sales taxes on coins, so It will be leveraging the paper to be a hard assett that I view is a long term appreciating asset that will not dissapear.

Cons on the loan is that if I leave the company, Ill have to pay it back in 90 days or pay additional taxes on it but I don't see this on the horizon. Besides, the $ amount I am talking about is under 10K so paying it back would not be unreasonable.

With regards to the compounding opportunity loss, The 401K is self directed which means I can move it at will to individual stocks and bear funds so I have the means to make back the capital difference with well time trades. I've been pretty successful this year (though by saying that, It will probably put a trading curse on me). I also intend to increase my contributions.

Question: Am I missing something in my logic about this being a prudent move ?

[Captain's Log]

Btw- I appreciate the POG may have a pull back soon. This is not something I am in a rush to do but will transact in a month or 2.

[Yoshaviah]

Not a bad idea. It might be good to consider stopping all contributions and just buying bullion in amounts over $1000 at a time (to avoid the tax) unless you can invest in bullion funds or short funds. But paper is paper, and paper claims on bullion are paper too, best to hold some of the real stuff.

[Captain's Log]

Yoshaviah, on Aug 30 2003, 07:58 PM, said:

Not a bad idea. It might be good to consider stopping all contributions and just buying bullion in amounts over $1000 at a time (to avoid the tax) unless you can invest in bullion funds or short funds. But paper is paper, and paper claims on bullion are paper too, best to hold some of the real stuff.

Yos-Tanks for the feedback. I'll probably keep the contributions going to trade miners, bear funds and certain energy plays. The one I am waiting is the gold bullion ETF. Maybe repeat the loans on an annual basis.