Alternative investment ideas are attracting a surge of investors seeking diversification and reduced volatility.

www.youtube.com/watch?v=0o5C5zNnG5k

Alternatives for interesting times. The last 18-24 months have been wild ones on Wall Street, and the volatility has motivated some sophisticated investors to look into non-correlated or indirectly correlated asset classes. With the rise in oil and gas prices, high net worth investors are naturally examining the potential of alternative investment programs, especially in the energy sector.

Sunny forecast for energy firms. The world appetite for energy – especially clean energy – is surging. Analysts project that global energy needs will be 50% higher in 2030 than now, with the economies of China and India spurring 45% of the increase.¹ Therefore, some economists and Wall Street analysts have become quite bullish about the long-term outlook for energy investments.

In recent years, accredited investors seeking greater portfolio diversity have begun to direct some of their investable assets into energy programs, oil and gas equipment leases, and private REITs focusing on the energy sector. Additionally, other investors are moving assets into ETFs and mutual funds focused on energy firms.

What was once “exotic” now seems fundamental. Direct energy investments represent just a slice of the alternative investment world. Commodities, managed futures, tax credits, real estate securities, real estate exchanges, annuities, even collectibles … there are all kinds of investment vehicles apart from Wall Street. While many people historically dismissed some of them as too exotic or speculative for their portfolios, that opinion has changed as investors have become more educated about their potential.

Let’s look at these intriguing numbers. As any financial advisor wisely notes, past performance is no guarantee of future results. But just for a moment, let’s compare a couple of blue chip indices with a couple of commodity indices.

Over the last three years ending April 25, the S&P 500 returned nearly 21%, and the DJIA about 27%. Across the same 3-year period, the S&P GSCI Commodity Index went up 57%. It also posted a year-over-year gain of 22% for the 12 months ending April 25, 2008. The Dow Jones-AIG Commodity Index returned about 27% in that same 12-month stretch. Did the blue chips do this well in the last 12 months?²

Interesting options for sophisticated investors. To make some of these investments, you do need to be an “accredited investor”. That is a category of investor defined by the Securities and Exchange Commission. In general terms, the SEC defines an accredited investor as

• an organization, partnership, corporation, business, or trust with $5 million or more in assets
• an individual or couple with a net worth of $1 million or more or stable annual income of $200,000 or more ($300,000 for a couple).³

As the value of these investments can fluctuate notably, they are not usually suited for the risk-averse retiree or the middle-class investor. But if you are a high net worth investor in search of diversification, they may be for you.

To learn more about how an investment in energy or other alternatives can help you hedge rising costs or add balance to volatile stock portfolios, please speak with a qualified financial advisor familiar with these kinds of investments today.

A way to reinvest the lump sum you’ve saved for retirement.

www.youtube.com/watch?v=anWJAu84VeU

As retirement approaches … money decisions become increasingly major. One big decision concerns what to do with the money in your company retirement plan.

… Consider a direct rollover. For most people, the most attractive option is an IRA rollover. In other words, you transfer the money from your 401(k), 403(b) or 457 plan into an IRA. It is not hard to accomplish, provided you have the guidance of a qualified financial advisor.

Here are the basic steps. When you leave a company, you usually have three options with your retirement plan: you can leave the money in the plan, roll it over into a new plan (if you elect to keep working for a new employer), or do a direct rollover into an IRA.

A direct rollover is not the same thing as a direct payment to you. Yes, your employer can actually write you a check for the full amount of your 401(k) account, but 20% of that money will be withheld for taxes.  Keep in mind that they 20% that they withhold may not be enough to cover all the taxes you owe.

If you want to avoid that 20% withholding, a direct rollover is the solution. It is a “trustee to trustee” rollover, which works like this: your employer writes a lump sum check not to you, but in the name of the trustee or custodian of the IRA that you are creating to hold the funds. You then let your company’s retirement plan administrator know that you’ll be doing a direct rollover. (There is almost always a form to be filled out, on which you can state the specific instructions for the distribution check.)

Your company sends you the check payable to the IRA trustee, with no withholding, and you have 60 days to deposit it in the IRA; day 1 is the day after you get the check. (Sometimes a wire transfer of assets occurs instead, between one investment custodian and another.) If you don’t complete the direct rollover in 60 days, you will pay tax on the entire amount. (There’s no grace period for weekends or holidays.)

If you want to leave work before age 59½ or you own shares of company stock, you should consider the tax implications created by those circumstances before attempting any kind of rollover.

Let’s talk about what you can and can’t do. You can make unlimited direct rollovers of your retirement account assets, and you can add the money in your retirement plan to an IRA you already have, if you don’t intend to go back to work and put those assets into a new employer plan. Once your retirement plan assets are in an IRA, you can invest them in practically any way you choose – in mutual funds, CDs, stocks, money market funds, annuities, and even more possibilities. You can also set up your IRA to make systematic payments to you.

You can’t roll over the assets from your retirement plan directly into a Roth IRA. You have to put them in a Traditional IRA first, and then convert to a Roth IRA by paying tax on the assets you want to convert before you can realize that tax-free growth.

Is it time to roll over your retirement money? If that time is here or getting closer, you need to be very careful with what could possibly be the largest lump sum you ever receive. Be sure to ask a qualified financial advisor about your IRA rollover options today.

Investment advice is offered through Pete Mitchell, Inc. a registered investment advisor in California.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice.