We’re supposed to be saving our money for our retirement. If you own your own business, that’s a crucial part of your business plan. But in the midst of today’s financial storms, where’s the safe haven?
Even the best certificates of deposit at your local bank don’t come within a mile of 2 percent. At that rate, stuffing money in your mattress doesn’t seem like such a bad idea.
If you’re paying attention, the stock market, commodities market and precious metals markets may feel to you a lot like Las Vegas, and looking at gold or silver prices starts to feel like you’re prepping for the SATs all over again. There’s got to be a smarter investment.
Robert Wiedemer, author of The New York Times best-selling book “Aftershock,” predicted the collapse of the U.S. housing and equity markets. He makes Nouriel Roubini, known as “Dr. Doom,” look downright cheery. His latest video interview predicts 50 percent unemployment, a 90 percent stock market crash and 100 percent annual inflation. This year.
Roubini, meanwhile, is warning that the recession in the Eurozone is only going to deepen unless austerity measures are coupled with their opposite, economic stimuli.
Whatever the future holds, the fact is we somehow have to try to prepare for it. Because chances are you won’t be able to work forever. If you’re saving your money, where should you invest it? We’ve all got friends or relatives (or even first-hand experience) with horror stories of retirement savings lost in the past few years when the stock market tanked, when Lehman Brothers went belly up, when all hell broke loose on Wall Street.
My cousin, a very frugal gentleman, liked to show me his collection of gold coins. “Gold is the only safe investment there is,” he assured me. “Gold is my guarantee against poverty.”
The price of gold dropped more than 10 percent last week, down about $200 an ounce. According to the news, investors were ditching gold in search of better returns in other assets. Investors, who often seem like pack animals, reacted by dumping silver, platinum and palladium, too.
Why did it happen? No one is quite sure. So whatever you decide to do with your money, you feel you have to play it safe.
“The most important thing I tell my clients is that you have to understand what you’re invested in,” said Barbara Ginty at Independent Financial Services in Kingston. “It’s your money. You worked for it.”
There’s an old saying: “If you don’t understand what you’re investing in, you shouldn’t be investing.”
Ginty said her local clients are usually retirees looking to ensure their future income. “Most of them are downsizing,” she said. “A lot of them are moving to Florida. Some people may want a combination of fixed income, equity, or a hybrid product. Putting all your money in one vehicle is risky.”
One option is an annuity, a mixed portfolio of investments wrapped in an insurance policy, which costs more but increases the safety of the investment.
But what’s right for you may not be right for your neighbor. There’s no one answer for everyone, so financial advisors say you should spend the time to let them really get to know you, your finances and your goals.
“Financial advisors ask more questions than probably anyone else you’ll deal with,” Ginty said. “We evaluate your whole life, learn how much risk you can accept in your investments. Then we design a plan that fits you.”
Fritz Haller of H. Haller Financial in Saugerties is urging his clients to pay attention to history. “I tell them that it’s not so much a weird economy, it’s the new normal. Prior to 1983 we had bear markets every five years. Then we had clear sailing in the Eighties and Nineties with interest rates, taxes, energy costs and inflation all holding or dropping. But we had a bear market that ended in 2002 and another that ended in ‘09, so I think we’re due for another.”
Haller said that bearish outlook shouldn’t scare you. If you’re prepared, according to Warren Buffett, that’s when money can be made. “I have a couple of quotes I always share with my clients, and one of them is Buffett’s: Be greedy when others are fearful and fearful when others are greedy.”
Haller compares the current economy to the period after World War II. “We had dirt-low interest rates, then tax rates and interest rates started going up. I think we need to be ready for things to be tough for awhile. But don’t be afraid of it. Be prepared.”
Haller strongly advising his clients to avoid index funds. “I think they’ve been over-used,” he explained. “I think today you want to be very selective. You want investments that are focused and specific; securities that are carefully monitored. Going into a difficult time, you want to be very specific about what is in your portfolio and not just hope the shotgun approach to investing will work for you.”
Haller’s predicting a volatile market for the next 20 years. “I think things are going to be tough for a while.”
Phil DeAngelo, managing director of Focused Wealth Management in Highland, sees it differently. For starters, he likes index funds. “Low-cost index funds are historically the best way to invest, so long as they’re tactically managed,” he said. “And I think we’re coming out of a bear market that’s really lasted since 1999. I think we’re starting a new bull market. This is more of a 1982 moment than a 2008 moment.”
What complicates investing today, according to DeAngelo, who said his firm has about $300 million under management, is that everything is related. “Money moves with volatility all around the world now,” he said. “It used to be that stocks would zig and bonds would zag — no more.”
Private equity is one area of investment that’s grown over the past five years. “Basically you’re investing in a business, but instead of checking it on the stock exchange every day, you throw it in a drawer,” DeAngelo said. “It’s a long-term investment, one you check quarterly.”
He personally has been aggressively bidding on residential homes. “Stocks are a faster return,” he admitted, “but if you can spare the money and the time there’s the potential to make good money in real estate right now.”
DeAngelo still likes the investment potential in the stock market. “There are a lot of blue-chip stocks that are cheap right now,” he said. “Plus these are TINA trades: There Is No Alternative.”
He studies the markets and he studies global politics. His opinion? America is still economically healthier than other countries. And many good stocks are “incredibly cheap” right now. “I think two, three, five years from now, you’re still going to have a cheap market, he said. “But that’s an opportunity if you’re investing for the long term.”