SEP IRA

Posts Tagged ‘sep’

WHY FIXED IRA?

Question: Is there a disadvantage to holding the same investment in different accounts of the same type?

For example, suppose I have $2000 of Contrafund in a Roth IRA with Fidelity, and $3000 of Contrafund in a Roth IRA with Schwab. Is that the exact same as having the total $5000 in one Roth IRA? (Substitute Roth IRA with any type of account, the point being the investment is split between the same type of account with the same tax considerations.) When I retire at age 98 and sell all my shares of Contrafund, will I end up with the same amount of money either way? Simple arithmetic says yes. However I am a novice investor, there is a lot I don’t know and don’t understand. I have read 3 books and dozens of web articles, but I can’t seem to find an answer that addresses this scenario. Am I leaking money somehow?

Answer: Roth IRA’s frequently have a maintenance fee. Having two IRA’s means two maintenance fees. Otherwise there is no disadvantage.

Question: Would purchasing 2-3 shares of Berkshire Hathaway be a good idea to add to my portfilio?

My wife and I have money in various index funds through Vanguard, we have money invested in both of our SEP IRA’s through work and we also own a Duplex. I have been keeping my eye on Berkshire Hathaway stock (B shares) and was thinking of purchasing 2-3 shares and let it grow for 10+ years. I thought this may be a good idea to diversify our portfolio even more.I think each share is trading for around $4,100 dollars right now.

Answer: Since you are already diversified, it would be OK to make the investment. By the way, I faced the same problem when the Class A shares were on the market for about $4000 each. The last trade on October 12, 2007 was 127,100 for the A shares that I could have purchased for $4100 and less in the 1980s. I am more comfortable owning mutual funds that hold Berkshire Hathaway and other stocks in a well diversified portfolio.
The last 7 years have been good, but who knows if they can keep it up. Even Warren Buffet keeps asking that question.
In June 1996, Berkshire’s Chairman, Warren E. Buffett, issued a booklet entitled “An Owner’s Manual” to Berkshire’s Class A and Class B shareholders. The purpose of the manual was to explain Berkshire’s broad economic principles of operation. An updated version is reproduced in the link below.
Warren Buffet is a nice man, but who knows if he will be running the company in ten years? Warren has given much of his wealth to a foundation run by Microsoft’s Bill Gates and Gate’s wife.
Charlie Munger is a nice guy, but he could be gone in ten years too.
Warren has a team of people who he says are ready to replace them when the time comes. Will they be as successful? Who knows when you have a few billion dollars that you do not know what to do with.

Bottom line, it would be ok to place a moderate portion of your investment money in BRKB. If you decide not to do so, there are a number of good choices in Morningstar that offer better odds for long term money than a money market account. My point is that you are not limited in your choices to BRKB or a money market account which pays over 5 per cent these days.

Mitch Tuchman, MarketRiders CEO on CNBC Squawk On the Street with Erin Burnett and Mark Haines