Pension Inflation Fighting Portfolio


Inflation…to be or not to de… Deflate that is. That is the question…we must answer to invest correctly in the days ahead.

I lean further towards inflation over deflation each day.

Here is another inflationary note from the New York Times in an article yesterday that said:

President-elect Barack Obama plans to include about $300 billion in tax cuts for workers and businesses in his economic recovery program, advisers said Sunday, as his team seeks to win over Congressional skeptics worried that he was too focused on government spending.

The legislation Mr. Obama is developing with Congressional Democrats will devote about 40 percent of the cost to tax cuts, including his centerpiece campaign promise to provide credits up to $500 for most workers, costing roughly $150 billion. The package will also include more than $100 billion in tax incentives for businesses to create jobs and invest in equipment or factories.

This may be really good news for business, but bad news for the US dollar and hence inflation.   Spending that is not matched by production is inflationary.

For most people, this is bad.

Yet inflation creates fortunes for those of us who know what to do.

There are three ways to profit and stay ahead of inflation. Multi currency investments in distorted shares….distorted commodities and distorted real estate.

I break down my investments into three portions, personal…pension…and property.

Yesterday’s lesson looked at my current personal investments to see how I am reacting to this scenario.  We saw that our current asset  breakdown in our personal liquid portfolio is:

Cash Accounts 36%
Bonds 64%

This cash and bonds have a currency breakdown of

Canadian dollar       9%
Euro                         18%
British pound          3%
Hungarian florin   19%
Norway Kroner        9%
NZ dollar                   9%
Sweden kroner       26%
US dollar                   8%

We asked …why all cash and bonds if I believe in inflation?

You may even wonder more when you see  my pension portfolio breakdown.

The asset breakdown of my pension liquid investments are:

Cash   Accounts   23%
Bonds                    61%
Shares                   16%

The currency distribution of these assets are:

Brazilian real                4%
Denmark kroner        33%
euro                              31%
British pound             10%
Turkey Lira                   8%
US$                               14%

This portfolio is more aggressive than my personal liquid portfolio, with shares, emerging shares and emerging currencies.

I also always keep the investments with the lowest potential profit in my personal account since profits there attract higher tax than in my pension account.

Most people recommend that you invest more conservatively in your pension.  Why. When you put money in your pension it is tax deductible.  When you make a profit in your pension it is tax deferred.

If you make a profit personally you pay tax.

So if you have a personal and pension account keep your safest low yielding deals  in your personal accounts. Put your high risk – high potential deals in the pension. If they lose you get to add more tax deductible funds to your pension.  If you make a big killing the tax is deferred.

International investments can be placed in pensions. Most investors use some form of pension as an important part of their financial system. There are many benefits including tax deductions, tax deferral and asset protection. Yet there is a huge pinch in most pension plans.

The problem is that most pension administrators are not willing to let you invest in real estate or offshore.

I administer my own pension and all of my pension investments are abroad.

The sad fact is, most investment restrictions in pensions are imposed not by legislation, but by your custodian or plan administrator. That’s right. You pay your pension administrators to help you, and they give you the wrong information.

The reality is, pension law allows you to invest in almost anything. Pensions can invest in international stocks, bonds, real estate, raw land, condos, office buildings, single or multi-family homes, apartment buildings and improved land, (as long as the real estate is not for current personal use).

Though such investments may be good for you, they may not be as profitable for your pension administrator. That administrator is often part of some large organization that wants you to keep your money with them so they’ll earn more from you. If that firm does not manage investments abroad (or real estate), they’ll tell you that you cannot invest in this way.

Or let’s give them a break and say that perhaps they are just poorly informed.

Either way the result is a problem. You are denied the opportunity to invest in what’s best for you. You are not allowed to put your most protected, tax deferred investments in the markets that offer the greatest potential!

Here is one solution. Jyske Global Asset Management now makes it easier to invest your pension correctly because they are setting up a program so they will work with IRA Administrators that provides custodial services and let Jyske manage your IRA funds.

If you have a Defined Contribution or Defined Benefit plan (as I do) you can already invest your fund via JGAM.

You can learn more about this from Thomas Fischer at Jyske Global Asset Management at fischer@jgam.com

Yet we must still ask… If Gary believes in inflation why does he have so much cash and why so many bonds?   Stocks are better investments during inflationary times.

We’ll look at the property and my business and then pull  all assets together in upcoming updates to provide cleared understandings.

Until then, good global investing to you!

Gary

Join Merri, me and Peter Laub of Jyske Global Asset Management at OUR INTERNATIONAL INVESTING & BUSINESS COURSE IN ECUADOR. We review economic conditions, Ecuador real estate, my entire portfolio plus investing and business ideas for the months ahead.

Feb. 9-11 Beyond Logic.

Feb. 13-15 International Business & Investing Made EZ
Feb. 16-17 Imbabura Real Estate Tour

Ask me questions!   Be sure to add MCI in the subject line of your email so I will know that you have sent a question.  I get over 100 emails a day so this helps me be more responsive to you.


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