A reader recently sent this question: Gary, I follow many of your articles. If a person like myself, knowing and understanding little to nothing about investing, has any chance of success. I need to hold onto the money from my divorce in order to survive in this country with such an exorbitant cost of living.
I need to understand how to make money from this money. Otherwise, I will keep chipping away at it until it disappears with paying monthly bills. Then I’ll find myself and my kids on the street.
Even though I am pushed to my limits with my back against the wall now, I still believe if others can find a way, than I can as well.
I have my money with Edward Jones, but as far as any kind of monthly income, it is not working in my favor to help with this problem. When I try to discuss with my agent with Edward Jones, all he talks is long-term, and I certainly understand the importance of this reasoning, but I need money to live on in the present time, not necessarily 10 years from now.
By that time, I will either be dead from the worry and stress of keeping my head above the water, or too old to enjoy it, even if I received anything. I have friends in Chile that follow the dollar and peso, and it does not seem complicated to them. They simply go to the nearest Money Gram agency, buy and sell through them on the strength of the dollar. There seems to be no risk at all, and they make a good monthly income, actually quite excellent, dependent upon the amount they have to play with.
Are your courses on investing, starting an export business or writing, viable worthwhile options to procure a better life for someone such as myself so laden with lack of understanding of such things? Thank you for your time.
Whew, these are daunting questions because each of us has such individual wants, needs, desires, experiences, savings, debts, health, habits, energy emotions and skills.
In this case, I know none of these facts about this reader. In any case since I am not an investment adviser I could not answer specifics anyway. I can share some stories that I hope will help this reader and all of you.
First I can say this. DO NOT, none of you, try to speculate on the US dollar versus the Chilean peso via Money Gram. This reader is missing something in this story. Even if one understood these markets well, had a great emotional makeup for speculation and trading, the costs would eat you alive. Very, very few of us should attempt to be traders. I have been involved with currencies for almost 50 years and the main thing I have learned is not to speculate in them.
We know the markets are rigged. We know our opponents (trading is not a win win game) are huge, good and a little bit evil.
Okay that’s out of the way, 99% of us (at least) should be investors and not speculators or traders.
Second remember Golden Rules of Investing #17 to #19.
Golden Rule of Investing #17: Expect 7% to 10% annual return in the stock market as a function of global nominal GDP growth and long term earnings growth plus risk premium.
This is even more difficult right now. That 7% to 10% return is based on the expectation that money in the bank will return 3%. The almost zero interest rate at this time has forced more investors into the stock market and thus increased risk and lowered potential returns. This leads us to rule #18.
Golden Rule of Investing #18: To attain higher growth you must either increase risk or trust luck.
I used to consult with the largest private investment company in Canada and the CEO told me one day about a problem client. She had about a million dollars to invest and needed a 5% return to live in the manner in which she was accustomed. The manager was able to barely attain this amount of income until the client, against the advisers advice, speculated and lost 20% of the portfolio. Now the client wanted him to earn 6.5% on the remaining $800,000.
The reality is; the stock market does not adjust its returns based on our needs. The correct step for that client was to either reduce expenditures or earn extra income in other ways. The portfolio’s ability to generate income had already been hampered by taking too much risk. To try and increase performance will risk this even more.
This brings us to rule #19.
Golden Rule of Investing #19: Do not count on extra ordinary returns. Be realistic.
If your assets are not sufficient to create the income you need, the solution is to earn additional income in other ways or reduce spending. Taking extra risk with an inadequate portfolio usually increases the risk of loss rather then enhances earnings.
My advice to this reader is #1: Contact Thomas Fischer at ENR Asset Management. His email is Thomas@enrasset.com.
ENR can help the reader determine how much income the portfolio can generate and whether they should have a low risk, medium risk or high risk position.
If the portfolio cannot reasonably generate the income required, then the reader needs to decide if they want to run their own business. If so our course on running a web based business or using publishing to develop a business can help.
If the reader does not feel up to being a business owner… get a job or figure out some skill that can be subcontracted to generate additional income.
If I Live Long Enough“If I Live Long Enough, I’ll really cash in next time”. I made this promise to myself in the 1980s. A remarkable set of economic circumstances helped anyone who spotted them become remarkably rich. Some of my readers made enough to retire. Others picked up 50% currency gains. I didn’t do much to invest then, but I did what I could as the profits rolled in for about 17 years.
Then the cycle ended. Warren Buffet explained the importance of this ending in a 1999 Fortune magazine interview. He said: Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!
Now I see those circumstances headed our way again.
The Dow Jones Industrial recently soared past 18,000 and reached an all time high. So why aren’t average investors all rich? There are several answers. First, even though the Dow has peaked, for the last 17 years the US stock market has been in a bear trend. You’ll see why in a moment. Another reason why the investors have not done so well is because of currency loss.
One final reason why profits have not been so good. Someone, probably someone you trust, has been stealing from you.
One of the biggest obstacles in profiting from the upcoming circumstances has been and remains the financial system. The reality is that banks and brokers have been structuring investments that are sure to lose. They sell you on these investments and then another division of the very same bank (or broker) that recommended the investment, bets against you. The bank knows that the investment is toxic. To add insult to injury, many of these same institutions cheat you on the way in and the way out (when you buy and sell a share) of the bad investment. Most brokers and bankerds are interested in your money making them rich, not in helping increase your wealth.
Three Patterns Create 50% profits.
Despite the predators on Wall Street who are waiting to take big gouges out of your savings and wealth, equities are still the best place to invest for the long term. This chart from the 24 page Keppler Asset Management 2014 Asset Allocation Review shows that over the past 80+ years equities have dramatically outperformed other types of investments.
Because of the predators on Wall Street (and every stock market in the world) the search for good investments requires a relentless search for value. Your investments have to be good enough to reap an outstanding profit even after the parasites siphon off part of the profit.
To take advantage of the once every 17 year circumstances, I chose to track Keppler Asset Management who continually researches developed and emerging markets globally. Keppler is one of the best market statisticians in the world and numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors. Keppler compares the value of each share in each market based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. From this study of monumental amounts of data Keppler develops a Good Value Stock Market Strategies. The analysis is based on long term, rational, mathematical facts and does not worry about short term ups and downs.
From Keppler I learned that market timing is not the way to get these high profits. Another graphic from the 2014 Keppler Asset Allocation Review explains why.
Click on image to enlarge.
A dollar invested 88 years ago in Treasury bills rose to $20.58. The same dollar invested in U.S. stocks over the 88 years grew to be was worth $4,677, UNLESS you missed the best 43 months. Literally all of the the Dow’s growth in 1,056 months came in 43 of those months. Your odds have been one in 24, better than roulette perhaps, but not good enough. Plus even after these odds, the predators are going to take their cut. You have to ask, “Am I that good at timing?”
The better alternative to timing is investing long term indexing based on value. Long term strategic investing in market indices reduces the amount of trading. Low trading activity is important because trades are where you are most vulnerable to predatory tactics.
A part of the long term strategic trading is to invest in low fee diversified Index ETFs. This simplifies your search for value because it focuses your research into lumps.
A comparison of US versus German stock market indexes gives an example of lump research and you can create good value, low cost, diversified portfolios that offer maximum potential for profit as they reduce risk.
Keppler’s research shows that Germany’s stock market is a good value market. Keppler lumps all the shares (or at least 85% of the shares) into the calculations. There is no attempt to select any one specific share. Keppler’s research shows that the US stock market index (a lump of about 85% of all the US shares) is now a bad value.
Germany has the world’s fourth largest economy. The country is the third largest exporter in the world and in 2013 recorded the highest trade surplus in the world making it the biggest capital exporter globally. Yet German shares have been overlooked. German share prices are cheap.
The German Stock Market as of January 2015 in terms of US dollars has a relative price to book value ratio of .78, a relative price earnings ratio of 0.87 and a relative dividend yield of 1.12. The US Stock Market has a much higher relative price to book value ratio of 1.29, a relative price earnings ratio of 1.07 and a relative dividend yield of 0.81. German shares cost much less, compared to the values and earnings, than US shares. German shares pay much higher dividends as well.
Keppler predicts that the US Stock Market (which is ranked as a sell market by Keppler) will have an annual index gain for the next five years of 3.1% and a total return (with dividends) or a total five year return of 21.7%. The same calculations for the German Market predicts an average annual index gain over the next five years of 7.5% and a total return (with dividends) or a total five year return of 47.3%.
Which would you rather buy, a 47.3% return sold for 78 cents on the dollar or a 21.7% return sold for $1.29 on the dollar?
You can forget about any specific share in the US or Germany and invest into an index (in this case the Morgan Stanley Capital Index) which represents about 85% of all the shares traded on the exchange.
You can invest in ETFs that passively invest in all the shares of the index in stock markets that offer good value. iShares investment company for example has an ETF that invests in 85% of the shares traded on Wall Street.
This ETF icalled the iShares USA (symbol EUSA) has risen from 22.91 to 43.40 or 89% in the past five years.
iShares also offers an ETF that invests in about 85% of the stocks listed on the German Stock Exchange (Symbol EWG). EWG has risen from 19.70 to 28.13 or 42% in the past five years.
Keppler’s lump reseach shows that Germany is a good value market. One simple (even very small) investment in iShares Germany MSCI Index ETF gives you a portfolio of almost all the shares traded on Germany’s largest stock exchange in Frankfurt. This ETF is a share traded on the New York Stock Exchange. The ETF invests in 85% of the shares in Germany. This ETF is a passive fund that does not try to outperform the growth of the German Stock Market. The managers simply track the investment results of the MSCI Germany Index. The MSCI Germany Index is designed to measure the performance of the large and mid cap segments of the German Index which is composed of the stocks of 54 different German companies and covers about 85% of all the German equities. Germany’s ten largest companies compose about 60% of the index. These ten companies are: BAYER (Health Care) composes 9.91% of the index – SIEMENS (Industrials) 7.89% – DAIMLER (Consumer Discretionary) 7.04% – BASF (Materials) 6.81% – ALLIANZ (Financials) 6.65% – SAP STAMM (Info Tech) 5.69% – DEUTSCHE TELEKOM (Telecom Srvcs) 4.46% – DEUTSCHE BANK NAMEN (Financials) 3.66% – VOLKSWAGEN VORZUG (Consumer Discretionary) 3.18% – BMW STAM (Consumer Discretionary) 3.15%.
You lump your research. You lump your investment. This makes it easy to capture the powerful economic circumstances that are unfolding now.
Just investing in Germany is not enough. There are currently ten good value developed markets, Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom. Plus there are 12 good value emerging markets. You can easily create a diversified portfolio in each or all of these countries with Country Index ETFs.
Investing in many stock markets through ETFs gives you opportunity in the second pattern of the falling US dollar. Preserving the purchasing power of your earnings, savings and wealth requires currency diversification.
The strength of the US dollar over the past five years is a second remarkable similarity to 30 years ago. In 1980, the dollar rose along with Wall Street. Profits came quickly over three years. Then the dollar dropped like a stone, by 51% in just two years. A repeat of this pattern is growing and could create up to 50% extra profit if you start using strong dollars to accumulate good value stock market ETFs in other currencies.
For example because of fears about the euro, EWG, the German ETF is down 9 percent over the last 12 months and down 8 percent over the last six months. These declines are created by currency concerns. When the euro regains strength, the shares have the potential to appreciate even more.
This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago. There is so much more to write and the trends are so clear that I have created a short, but powerful report “Three Currency Patterns For 50% Profits or More.” This report shows how to earn an extra 50% from currency shifts with even small investments. I kept the report short and simple, but included links to 153 pages of Keppler Asset Stock Market and Asset Allocation Analysis so you can keep this as simple or as complex as you desire.
The report shows 22 good value investments and a really powerful tactic to use that allows you to accumulate these bargains now even in very small amounts (even $5,000). There is extra profit potential of at least 50% so the report is worth a lot.
Research shows that most people worry about having enough money if they live long enough. I never thought of that. I just wanted to live long enough to see the remarkable economic opportunity that started in 1980 start again and those that continue to offer opportunity. This powerful profit wave has begun. I made it and am glad you did too. Even more I look forward to the next 17 years and sharing how to have more than enough money for the rest of your life.