January 24, 2011 Leave a comment
This blog is all about the search for good return on investment and safety. There was a time when I didn’t worry about the safety piece. But, as a baby boomer, I’ve come to that point in my life when safety is paramount. I can’t afford to see my retirement funds crash to half of their previous value just before retirement, as happened to many during the crash of 2009.
Some advisors will point to “diversification” as the solution. But, even with “proper” asset allocation among domestic and international mutual funds and bonds, many boomers lost a major piece of their retirement savings during the 2009 stock market crash. Many had no way to exit from the limited choices in their employer’s 401K plan. Future retirees found that, in one way or another, all of their investments were linked to the condition of the economy through interest rates, the stock market, or even through the health and viability of well known banks. Some who held on now feel validated, as the market has recovered greatly from the lows of 2009. That bravado often evaporates when they examine the huge oscillations in the DOW over the last 20 years.
In these uncertain times, many investors have simply turned to holding cash or classic “safe” investments such as CD’s, money market accounts, or U.S. Government securities. These investment options are safe. Of course, the downside is that they usually offer paltry rates of return. While these types of safe investments are occasionally advertised with rates as high as 3% or 4%, this is all too often an introductory rate that will eventually decrease once the initial honeymoon period is over. It is more common to find rates in the 1% to 2% range, or even lower for U.S. Treasuries. Thus, the price of “playing it safe” is a low rate of return that may not even keep pace with inflation.
So where does this leave the investor that wants true diversification from their traditional holdings while still retaining the potential for a reasonable rate of return? Well, that’s what the search, and this blog, is all about. I have some ideas that I’ll share in future postings to this blog. In the meantime, I welcome your ideas and thoughts. We are all in this search together.