The Bad Advice Most Advisors Give Retirees
“Zach, I decided to go ahead and put all of my money with this investment advisor who has been calling me…”
I cringed as I drove down the highway.
This past Friday, I was headed home from the airport after two weeks on the road. And with a few minutes of commute time to spare, I decided to call my old friend Ed.
Ed is a few years away from retirement. He’s got two boys who are starting to look at colleges. He has a modest amount of funds set aside for retirement and Ed needs for these funds to grow quickly.
I was worried that his new-found investment advisor would steer him into some risky areas of the market, and that my friend Ed would be hurt if the market pulled back.
In some ways I blamed myself…
You see, Ed’s a good friend of mine and he’s had my back when I needed someone to talk with in the past. We trade stories about raising our kids, and help each other think through situations as parents.
Fact is, I’d do anything to help Ed figure out the best way to invest his retirement account. Of course I can’t give individual financial advice, but I’ve often suggested that Ed subscribe to my research. Because that’s where I share my very best opportunities for building and protecting retirement savings.
I had been on the road the past two weeks and we hadn’t been able to connect. By the time I called Ed to reiterate my suggestion, he had already decided to pull the trigger and go with an investment advisor.
And I had no idea what this advisor was going to do with Ed’s retirement.
The Bad Advice Most Advisors Give Retirees
Today, when retirees (and future retirees) need to be more aggressive with their accounts, investment advisers usually recommend traditional — and flawed — strategies for boosting wealth.
These strategies usually include big allocations to speculative areas of the market like small-cap stocks and new tech companies. The idea is that small-cap stocks and speculative technology stocks will grow faster than “boring” blue chip stocks. So theoretically this is a better way to accelerate your investment returns.
Unfortunately, while these investments can grow fast, they can also fall fast. Sometimes with devastating effects. Our generation has already seen two big bear markets in which investors got wiped out owning speculative stocks.
Today, investments in speculative stocks are even more risky than normal. That’s because the market has been trending higher for years, without a meaningful pullback.
Many of the stock prices for these speculative stocks are at unreasonably high levels. So when advisors recommend retirees put a big chunk of their wealth in speculative growth stocks, they are basically recommending investors play with fire (or with hand grenades).
It’s just not sound advice.
Thankfully, it looks like Ed stumbled upon one of the few investment advisors who actually thinks outside the box.
The Surprisingly Good Advice Ed Received
As I drove down the highway, I was kicking myself for not carving out more time to talk with Ed. After all, he’s a good friend and I should have at least tried one more time to share my research with him.
And then Ed said something that made me feel much better…
“Zach, this guy thinks I should have a good bit of my account in gold. So while we’re still taking a balanced approach, I’ll be locking in some big profits if gold moves higher. What do you think about this strategy?”
“That’s music to my ears, Ed” I told him. “I’m so relieved that you got some good advice, and that this advisor is steering you in the right direction.”
I have to say that it was really refreshing to hear that this advisor is willing to think outside the box and help my friend Ed make a great decision.
And Reader, I hope that you’ll take a page from this playbook and make sure that you have exposure to gold in your retirement account too!
Why Now is an Especially Great Time to Invest in Gold
This week, Janet Yellen and the Federal Open Market Committee is set to hike interest rates by 0.25%. The announcement will be made on Wednesday afternoon, following the Fed’s scheduled two-day meeting.
I’ll have more to say about this meeting and what the quarter point interest rate hikes means for you throughout the week. But you should know that gold has pulled back a bit ahead of this meeting.
Here’s what is happening…
Some investors believe that higher interest rates will be bad for gold. They argue that higher interest rates lead to a strong dollar. And if the dollar is stronger, it will take fewer dollars to buy an ounce of gold.
But these investors are missing one big thing…
The reason the Fed is raising interest rates, and the reason the dollar is stronger is because the Fed is trying to fight against clear signs of inflation. Of course, we already know that inflation is definitely a good thing for precious metals like gold and silver.
Now, I don’t think the Fed is going to raise interest rates much any time soon. That’s because if the Fed raises rates too quickly, it will stifle the current economic recovery. Higher interest rates make it tougher for companies to borrow capital for growth opportunities (and kill the jobs recovery). Also, higher rates would make it tougher for individuals to pay down debt, or get new mortgages for home purchases.
So the prospect of higher interest rates doesn’t worry me because the Fed’s hands are basically tied.
On the other hand, Trump is still charging ahead with his agenda. He’s cutting deals, building walls, approving pipelines, and cutting taxes.
And the biggest deal of all, has actually been in play since 2008.
I’m talking about the deal the Fed cut with the largest U.S. banks. This was the deal that cut interest rates, bailed out the financial institutions, flooded our economy with printed money (or digital money), and planted the seed for future inflation.
Today, the Fed’s grand experiment with zero interest rates and a flood of printed money is finally kicking off inflation. And that inflation will push gold prices higher. In fact, gold could easily double in a very short period of time.
So the current outlook for gold is very good. And the recent pullback in gold prices gives you a great opportunity to buy gold cheaply. Perhaps at a cheaper price than you’ll ever see in your lifetime again.
Here’s to growing and protecting your wealth!
Editor, The Daily Edge