So, I’ve remained within the ruts of financial loss long enough. I’ve made a decision to implement a different strategy that will hopefully help me to recover all of my losses from the recession of 2008, plus actually produce a return on investment. (I know that is an odd concept, especially if you’ve been in the stock market during the last decade.) Now I’m not saying that people haven’t made money during all of this. Shorting is a technique I’m sure many benefited from during the downturn. But for the average investor, one that is making consistent contributions into somewhat conservative mutual funds and a possibly a few more aggressive ones, the past decade has not been fun. I personally watched (yes, watched. no action taken) as my “safe” investments dwindled by 60%. Why would I do such a thing? That’s like watching a thief empty your house of all of your possessions. Because I was sticking to the maxims: ‘invest and forget about it’, ‘buy and hold for the long term’, ‘you don’t lose money until you sell’, you get the picture. Was I wrong to stick to these maxims? I don’t think so. What I do believe is that I was invested in the wrong place…..the stock market. I no longer believe that the stock market is a place where an average person investing for retirement will ever come out ahead. At least not for the last decade, nor in the near future. I believe that after you factor in the highs, the lows, the in betweens, inflation, taxation, and then timing your exit, you’d be lucky to break even. And if you’re only breaking even, what good was it to have your money exposed to risk in the first place. If I would have placed all the contributions that I’ve made to my IRA, stocks, and mutual funds into a pillow case and never invested it, I would have about 30% MORE money than I have right now. So for the last 7 years of investing in the market I’m 30% poorer. Enter my wake-up call.
As I stated, at one point I was 60% down. I have recovered about half of that loss. However, I believe the stock market is going to go way lower before it goes higher. Everything is still overpriced, the economy overall is still in a bubble (albeit, somewhat deflated now) and we are in the beginning stages of deflation. The talk from Washington is that everything is fixed due to the stimulus and that the economy recovering. I tend to trust history, trends, fundamentals, and the technicals. Notice that ‘politicians’ were not included in that list of things I trust. As a matter of fact, it was them telling everyone that things are getting better that made me suspicious. Another maxim: ‘whatever a politician says its usually just the opposite’. The stock market is headed lower, way lower, and it’s not getting back what I’ve recovered so far. I’ve decided to take action.
As of about 2 hours ago, I have sold all of my mutual funds, all of my stocks, and am completely liquid (except for the one mutual fund that has made me money all along). My IRA is cash balance only and no longer exposed to the market, stock account all cash, mutual funds…cash. I can tell you it wasn’t easy to do. It was actually difficult for me to push the ‘Sell’ button and realize a 30% loss. But I strongly feel that I can do better elsewhere. So, everything I’ve worked for is now in cash and not exposed to the market. Therein lies another problem….it’s all in cash. Cash is not a safe store of wealth. In fact, if left in cash I would actually continue to lose money due to the effects of inflation. So, I don’t want stock market exposure (and loss) and I definitely don’t want to leave it in cash. I’m turning to precious metals.
Gold and silver are the perfect investment vehicles for my financial goals. My plan is to acquire as much physical silver as I possibly can and to supplement that with lesser amounts of gold. I feel it is important to have gold, but I believe the upside potential to silver is much greater. I have laid out a plan that I believe will recoup my 30% stock market losses in approximately 1-2 years and then begin to bring back to the positive, all while the stock market heads south. Another advantage of the plan I am implementing is that I will actually have possession the investment. It’s not just some piece of paper or a couple of digits in a computer. It is a tangible asset that I can hold. It can’t just disappear or washed off the books in an economic catastrophe. (yes, thieves can make it disappear, but that is why I practice the 2nd amendment) At this point you may be thinking that I’m making a big mistake by putting all my eggs in one basket…I mean, we’ve heard over and over that diversification is the key. Well, Warren Buffet once stated, “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.” As well as, “I prefer to keep all my eggs in one basket and watch that basket closely.” I don’t claim to know what I’m doing by any means, but I do know what hasn’t been working. However, I’m not going into this blind and have done my research in order to make an educated decision. It also helps to listen very closely to those who know the markets like the Warren Buffets, David Morgans, Mike Maloneys, and this next one is a shocker: Alan Greenspan. Since leaving the Fed, he has been consulting for a fund manager and since his arrival the fund has increased it precious metals holding by five fold. Seems like ol’ Greenspan knows about the economy after all.
Precious metals are on their way up, stocks will correct back to fair market value(which means continue downward), and gold and silver will be the safest way to build and store wealth for some time to come.
Ultimately, everything is speculation….but history does repeat itself so you can either fall victim to it again or educate and position yourself to reap the benefits.
Funny link about the economy: The economy is so bad…..