Wealth Creation
Few people start thinking about saving for retirement when they’re just starting out in the workforce. But that might be the best place to begin. The earlier in life you start saving and investing, the better prepared you’ll be.
Retirement planning isn’t just about tucking money away for your golden years. It’s about replacing your main source of income once you retire, with another source of income.
Right now, almost 60% of middle-class retirees expect to run out of money if they maintain their pre-retirement lifestyle and don’t cut spending by at least 24%. The majority of Baby Boomers view retirement as a crisis—but only a small minority know how much money they’ll need for retirement.
A long-term approach to retirement investing produces income, wealth creation, and capital growth. As it stands, retirement savings comes from three different sources: social security; pension; and investments.
And some Americans will need to find investments with strong returns and wealth creation. A large number of Americans can look forward to spending 20 years, or more than 25% of their life, in retirement. At the same time, almost half of the population lives longer than the average life expectancy; and will need to have retirement savings that last a lot longer.
For nearly 100 years, U.S. inflation has increased approximately 3.21% a year. At that rate, prices double every 22 years. If you enter the workforce at age 20, you are likely to see prices double twice by the time you reach 65. As a result of compounding, that means an item you bought at 20 will be four times as expensive by the time you retire.
If you live longer than the average American, chances are you could see prices double again during your golden years. That’s why it’s important to remember that investing does not stop at retirement.
A lot of people do not have pensions to look forward to and, at just $1,200 a month, social security isn’t much to live on. That’s why a sound, diversified, investment strategy that encompasses stocks, bonds, mutual funds, real estate, etc., is essential for ensuring you are more than prepared for retirement.
No matter what your tolerance for risk is or your financial acumen, there is a wealth creation strategy out there to meet your needs.
Four Ways to Profit from America’s Wealthiest Citizens
By John Whitefoot for Daily Gains Letter | Nov 7, 2013
Half of the U.S. workforce is partying like its 1998—and not in a good way. According to the Social Security Administration, the median wage in the U.S. in 2012 was $27,519.10, marginally better than 2011’s median wage of $26,965.43.
That said, the median wage remains virtually unchanged since 1998, when the median wage was $27,519.55 when adjusted for inflation. So actually, you made $0.40 less in 2012 than you did in 1998. But I digress.
The report shows that more than half of Americans earned less than $30,000 in 2012. Incredibly, 15% of working Americans took home less than $5,000, with an average amount of just $2,024.79. During 2012, the S&P 500 climbed 13%, illustrating that the majority of Americans are not benefiting from the so-called recovery we call the U.S. economy.
Fear not, for there is hope. Stagnant wages are not hindering everyone: the number of Americans pulling in more than $5.0 million a year in 2012 increased by 26.8% year-over-year to 8,982. In 2011, just 7,082 Americans earned more than $5.0 million.
These stratospheric numbers only take net earnings into consideration; they do not account for capital gains made on the stock market, dividend growth, etc. Whereas America’s wealthiest citizens turn to the stock market to pad their retirement savings, the majority of Americans rely on increasing property values, income vehicles, and pension funds to pave their way to retirement.
Thanks to a record run on the S&P 500 and Dow Jones Industrial Average, America’s wealthiest have been seeing their holdings increase significantly since the Great Recession ended in 2007. On the other hand, thanks to the artificially … Read More
These Emerging Markets to Benefit from New Global Economy
By John Whitefoot for Daily Gains Letter | Jun 25, 2013
While the majority of Americans might not have passports, that doesn’t mean we should avoid investing in foreign countries—especially in this market. Since rebounding in 2009, the S&P 500 has climbed around 145%, peaking on May 22 at 1,687.18. And that’s when it all started to go wrong.
On May 22, the Federal Reserve hinted that since the U.S. economy seemed to be on the right track, it might begin to ease its $85.0 billion-per-month quantitative easing policy. Just the idea of losing out on free money sent the markets into a frenzy—over the following two weeks, the S&P 500 lost more than four percent of its value.
While the S&P 500 regained some ground, it continued to be volatile leading up to the Federal Reserve’s June 19 meeting. During that meeting, the Federal Reserve announced that while it would continue with its quantitative easing policy, it would still ease the $85.0 billion-per-month program by the end of the year, and could end it altogether in 2014. Over the following two days, the S&P 500 slipped almost four percent.
While many investors are worried the U.S. economy will not be able to sustain itself without the Federal Reserve’s bond-buying program, there are other markets that investors can turn to if they’re looking for protection and wealth creation.
But bigger is not always better in this economic climate. On June 19, the Hong Kong and Shanghai Banking Corporation (HSBC) said its preliminary monthly Purchasing Managers’ Index (PMI) for China fell to a nine-month low in June of 48.3; a reading under 50 indicates a contraction.
Since May 22, the iShares MSCI … Read More
Investing Strategies for Conservative Investors and President Obama
By John Whitefoot for Daily Gains Letter | May 21, 2013
Despite the record run of the Dow Jones Industrial Average and S&P 500, many investors continue to sit on the sidelines, preferring capital preservation to wealth creation. It could be because they don’t trust the current bull market or the conflicting economic data trickling in. Many investors could also be playing it safe in light of the Great Recession that began in late 2007.
Taking a conservative stance generally entails considering lower-risk investing options like fixed-income Treasury bonds and blue-chip stocks—again, wealth preservation, not wealth creation. For many, this is a safe and steady strategy that a lot of conservative investors have been gravitating towards.
But for conservative investors looking for more growth, there are other options out there.
On Wednesday, May 15, the White House released the President’s financial disclosure forms, which includes his financial interests. Aside from a couple checking accounts, the President is heavily invested in index funds for his retirement; in particular, the Vanguard 500 Index Fund (VFINX). (Source: “Public Financial Disclosure Report,” The White House web site, last accessed May 15, 2013.)
The Vanguard 500 Index Fund invests in 500 of the largest U.S. companies, which span many different industries and account for about three-quarters of the U.S. stock market’s value. The fund returned 13.8% over the last year and 12.5% over the last three years. The Vanguard 500 Index Fund also has a $3,000 minimum investment. (Source: “Vanguard 500 Index Fund Investor Shares,” The Vanguard Group, Inc. web site, last accessed May 17, 2013.)
Investors interested in mutual funds need to contact either the company or their financial advisor to get involved.
Investors not … Read More
Three Ways to Invest and Save Like a Millionaire—Even If You Aren’t One
By John Whitefoot for Daily Gains Letter | Apr 26, 2013
The markets are up, and U.S. economic trends are slipping. The stock market may be hard to read, but the way Americans are saving for retirement isn’t. If the numbers are to be believed, Americans are saving too little, and our hopes for a comfortable retirement are in serious jeopardy.
According to a recent survey, U.S. workers are losing (or have already lost) confidence in their ability to have enough money for retirement. Fifty-seven percent of U.S. workers reported less than $25,000 in total household savings and investments (excluding their homes); in 2008, only 49% said they had less than $25,000 saved. (Source: Helman, R., et al., “The 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many,” Employment Benefit Research Institute web site, April 16, 2013.)
The survey also found that 28% of Americans have no confidence they will have enough money to retire comfortably, the highest level in the study’s 23-year history. In 2007, 10% said they had no confidence.
Have the so-called recovery and record-reaching Dow Jones Industrial Average and S&P 500 helped those financially prudent Americans save more for retirement? Nope; only 13% of Americans are confident they’ll have enough money in retirement, a sharp decrease over the 27% of respondents who said they were very confident way back in 2007.
Debt might have something to do with it; 55% of workers and 39% of retirees said they struggle with their levels of debt, and only half said they could come up with $2,000 if an unexpected need popped up in the next month.
All things being equal, I think we’d all like to know … Read More
Why You Should Consider Ditching Your Mutual Fund Manager
By John Whitefoot for Daily Gains Letter | Apr 10, 2013
More proof has been released that suggests some retirees are better off handling their own wealth management strategies. According to a recent survey, individual investors who paid a mutual fund manager over the last decade would have done better by taking the reins themselves and investing in a passive index fund at a much lower cost. (Source: Pratt, J., “Study: Only 24% of Active Mutual Fund Managers Outperform the Market Index,” NerdWallet, March 27, 2013.)
The survey examined more than 24,000 mutual funds and exchange-traded funds (ETFs) available to U.S. investors for a 10-year period ended December 31, 2012. At the end of 2012, investors had invested more than $7.0 trillion in the 23,000-plus actively managed mutual funds and ETFs. Investors placed just $2.5 trillion in passive funds.
Of those who paid to have their funds managed, only 24% of active fund managers beat the market over the past 10 years. During that time frame, actively managed mutual funds returned just 6.5%, while the passively managed index products averaged 7.3%.
The return statistics for actively managed funds is probably even lower than the reported 6.5%, because the study does not include information on those funds that closed during the 10-year period.
Still, is it really possible that 76% of active fund managers wasted their money getting their Master of Business Administration (MBA) degrees, yet they are no better at finding winning indices than retail investors? This is where it gets fun. There’s even more compelling evidence to consider if you’re waffling between using an actively managed index and doing your own due diligence.
It turns out that a large number … Read More
