Investment sounds too good to be true? It is
© St. Petersburg Times
Q. I sent a substantial sum to a local organization to invest in currency trading. Now there is a dispute between two of its top people, and I am worried about getting my money back. The Web site looked very good. Every month they would come up with more tempting offers. In August they offered a 25 percent return for nine months. The more you put in, the more you made. They even quoted me 50 percent in three months, but I couldn't do it because you had to put up $200,000. What should I do?
A. Ask for your money back and thank your lucky stars if you get it. Then I suggest that you try to figure out why you fell for this offer in the first place. I didn't have to look at the Web site long to see red flags waving everywhere.
Promises of high returns are always suspect and often are part of a Ponzi scheme, in which money from new investors is used to pay old ones. While people do sometimes earn a big return on a good investment, that isn't something anyone legitimately can promise in advance.
The testimonials on this Web site are all anonymous or unverifiable. They may sound good, but they are not proof of anything. Did you see account statements that showed the actual trades that produced the claimed results? Did they provide you with any investment disclosure documents?
Any time you are considering investing in commodities, check out the company and affiliated individuals with the National Futures Association (www.nfafutures.org). If you find they are not registered, ask why. As a general rule, it is safer to invest with people and companies that are registered and regulated.
I also recommend a visit to the Commodity Futures Trading Commission Web site (www.cftc.gov). Click on "customer protection," and one of the first articles you will find is headlined "Beware of commodity pool investment opportunities promising large profits and little risk, even when offered by persons you know." Does that description ring any bells? You can also file a customer complaint online, which I have a feeling you will want to do in the near future.
Q. I have a stock in my IRA that does not pay any dividends. Can I do a tax-free rollover by taking the stock out of the IRA as a distribution in kind and then, within 60 days, replacing it with an equivalent in cash? I would like to avoid paying a brokerage commission, which I would have to do if I sold the stock within the IRA.
A. The answer is no, according to IRA expert Ed Slott, an accountant in Rockville Centre, N.Y.
"When you withdraw from an IRA to roll over to another IRA or back to the same IRA, you must roll over the same property," he said. "The law is crystal clear on this. If you withdraw stock, you must roll over stock. If you withdraw cash, you must roll over cash. If you withdraw blueberries, you must roll over blueberries."
I don't think blueberries are an approved IRA investment, but you get the point. If you do what you have in mind, you'll be subject to both tax on your original withdrawal and a 6 percent penalty for every year your "excess contribution" of cash stays in the IRA.
If you want to change investments, pay the commission.
Savings bond update
New savings bond interest rates took effect Nov. 1, and I bonds now offer a better deal for investors than EE bonds. The EE bond rate for the next six months is 3.25 percent. The I bond rate is 4.08 percent, combining a fixed rate of 1.6 percent that applies for the life of the bond with an adjustable rate based on the rate of inflation.
Online Money Map
That giving time of year is fast approaching. If you are feeling charitable, be sure to check out whether the groups appealing to you for money are legitimate. At GuideStar (www.guidestar.org), you can see copies of the IRS forms 990 charities are required to file and learn about their mission and programs.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
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