This article is aimed at investors 50+years old who have built up their IRA to a six figure amount and are worried about market volatility and uncertainty as to where the US economy is headed in view of the FED’s monetary policy.
In article written by Michael Covel in the Daily Reckoning (September 16, 2016) titled “Do You Want to Retire Rich? Then Read This….” he noted that most US equity fund managers under performed all benchmark indexes for the past 14 years. As a result of this, many average investors moved their money into passive indexed funds. Passive index funds mimick an index for example the S&P 500 Index. Covel states ”You can’t blame investors. Fund managers are paid to add value and provide downside protection. But they clearly have no skill. They’re only in the game to wring fees from ignorant masses”.
Covel goes further and says marketing campaigns have pitched low-fee index funds and “buy and hold on” for the long term as the solution to managed funds under-performance. The problem with this strategy is that investors will experience financial loss when the next market down turn happens. Market down turns of 50% or more have happened in the past and will probably happen again.
Buy and hold strategy is only good if you expect to live forever so that you have time to recover from market downturns. The best way according to Covel is to follow a trend following strategy. This means that you need to be proactive and buy when the trend is up and sell your index fund when the trend isdown. Covel concludes the article by saying “If you have a pulse, if you are still not fully brainwashed by the zeitgeist of government mind slavery, and if you really want the chance to get rich and cover your retirement, trend following is not the only way to go – but it’s the damn best way.”
Another way to preserve your savings in your IRA is to diversify and buy physical gold. By adding gold as a relatively small percentage of total assets, long term risk adjusted returns will improve due to diversification.
According to a World Gold Council analysis, in a low interest rate environment gold returns tend to be twice as high as the long-term average. If short-term interest rates are below 4% in real terms, average gold returns will remain positive. (Gold Investor, June, 2016 edition, Page 13,”Too much risk, too little gold” by Juan Carlos Artigas, Director, Investment Research, World Gold Council)
The Teacher Retirement System of Texas is the eighth largest pension fund in the United States. The fund set up a Gold Fund in order to improve the fund’s long-term risk adjusted returns due to diversification. Shayne McGuire, the Emerging Market portfolio manager of the Gold Fund states that “Ultimately our decision to invest in gold as an asset separate from commodities was based on the diversification benefits to the overall portfolio.” (Gold Investor, June, 2016 page 8, published by The World Gold Council)
The message is clear from the experts: To improve risk-adjusted returns diversify your assets. Consider buying physical gold in your IRA to diversify your retirement assets.
