3 Sources to Fund Futures Trading

Posted by Deb | Futures Trading Tips,Guest Post | Sunday 26 August 2012 10:22 pm

Futures Trading can be quite rewarding when you know what you are doing. On the other hand, taking money out of pensions funds to trade should not be done lightly. Even if the guy at the cafe thought it’s a good idea, or the cleaning lady at work swears by it as she drives off in her new car, trading is not for the un-initiated and sound financial advise should be obtained from an expert. Trading has an element of risk, and if you are not sure what you are doing, the learning curve can be expensive and good money can be lost in a flash. If however you are serious to get started in futures trading but don’t have the money to get started? That’s fine. You can always raise the money you need. You might even have money laying around that you’re not aware you can use. Before you start putting in overtime at the office, consider a few simple ways to raise the capital you need:

Life Insurance

Cash value life insurance, like whole life and universal life, are excellent sources of capital. If you have a policy, call your insurance company to find out how much cash value is left in the policy. You can borrow against both whole life insurance and universal life, and you can make withdrawals from universal life policies.

 

Policy loans are typically offered on a preferred loan basis. This means that you don’t need to fill out a credit application for the loan. Instead, the insurer will simply give you the money as long as you have the available cash in your policy. The insurer secures the loan with the death benefit. If the policy lapses, or you die, then the insurer pays the death benefit, less any outstanding loans, to your beneficiary. Loans can be repaid on a flexible schedule that you control and can be used for any purpose including investing.

 

Retirement Plans

 

Some retirement plans allow you to borrow against the value of the investment account. Others allow you to withdraw funds for specific purposes prior to retirement. While most retirement accounts do not allow you to withdraw funds for investment purposes, Roth IRAs allow you to withdraw your principal contributions for any reason. You won’t incur a penalty for the withdrawal as long as you do not take any of your investment gains prior to age 59 1/2. Being able to withdraw principal contributions before investment gains means that you can use the money for investing in the futures market.

 

If you are certain you will never use your IRA or 401(k) plan, consider making withdrawals under IRS rule 72(t). This special provision in the IRS code allows you to make withdrawals prior to age 59 1/2 without incurring a penalty. This would be most useful for withdrawals from a traditional retirement plan or a plan that does not otherwise allow withdrawals prior to retirement.

 

When taking money from a 401(k) plan under rule 72(t), you’ll have to be separated from your employer. You may be able to make in-service withdrawals if your plan administrator allows it. Not all of them do. Even then, the IRS requires that you be at least 59 1/2 if you are still working for your employer.

 

Yard Sale

 

If you’re like most people, you have stuff that you don’t want or need anymore. You can have a yard sale to get rid of your junk, or you can selectively sell items on eBay or another auction-based website. Raising funds this way spares your retirement account and allows you to raise money without having to work extra hours or risking money in your insurance policy.

 

Borrow Money

 

Borrowing money from friends and family is probably the riskiest way to raise money for investing. If you lose the money, you’ll have to repay the loan and failing to repay could destroy important relationships in your life. However, if you’re responsible with money, it could also turn out very well for the person lending you the money. Offer the lender a cut of your profits in the futures market.

 

Consideration

 

Before investing in futures, make sure you have a firm understanding of what you’re getting yourself into. Don’t go it alone if this is your first time. Investing in futures requires specialized skills and knowledge. A broker would be an invaluable resource as well as a good financial coach to ensure that you don’t end up losing your shirt.

 

Author Bio:

Guest post contributed by Hayley Spencer for EasyFinance.com. Hayley is a freelance writer and a successful futures trader. Her articles appear on various investment blogs. Find out about Debt Management from Easy Finance.

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