Research and Strategy: The Successful Investor's Tools

Research and Strategy: The Successful Investor's Tools

If you currently have a self-funded retirement account, or need to start one, consider the current interest rates and how much gain you will receive for your money. In reviewing a popular IRA mutual fund site I discovered that, as of today 4/7/2011, their best yielding funds were at around 16% over ten years. Just a handful of the many they offer broke 10%, and the rest were at the levels of my savings account in 1970 when I was five years old. The best yielding funds, you may have guessed, are also their highest risk. Is that necessarily bad? No. However, there are ways to avoid that situation altogether.

One of the reasons these funds are yielding so poorly is because the Federal Reserve is deliberately limiting interest rates to avoid a spike in inflation. This strategy is only mildly effective. If you check out the products you buy at the grocery store you will see that while prices have gone up only a hair, packaging is significantly smaller. This is "cloaking" inflation. So prices are rising, but interest rates are being held deliberately low, producing a stagnant economy where goods cost more, but income is not rising, and debt continues to increase. As a result the dollar has less value, and dollar-based investments follow suit. They have less value each year, aside from periodic market spikes, and there is no end to this trend in sight.

Contrast this trend of the dollar's drop in value with PMs (precious metals), and a different trend develops immediately. Gold is up over 100% in less than ten years, and Silver is the best performing investment of the decade, at well over 110% returns. The reason for this is simple. When the dollar loses value, real money (trading currencies that are independent of nation or economy: gold and silver) increases in value. When the dollar was on the gold standard, this protected the economy of the USA from volatile shifts and damaging highs and lows. When President Nixon took the USD off the gold standard for good, the stability of the dollar failed, and it has been losing value every year since.

While I am not selling precious metals in this article, I will say that I am heavily invested in them. The dollar-based investments are too volatile and dependent on a debt-based economy not going sour. To me that was too big a risk to take. More and more economists are predicting troubles for the dollar ahead, and the Fed's QE policies (quantitative easing or money-printing for short) weaken the dollar daily. As more and more money is print ed, what is in circulation loses value. Added to that issue is the debt of the USA which is more than every other country in the world combined. We are not paying down the debt, the interest on the debt is being controlled with printed money. It doesn't take much imagination to see where this will lead, eventually.

The bottom line is that your investments should be researched and the strategy you choose for investing should match the times. Eventually, after the dollar has had its final fall, and the US economy has stabilized, precious metals will drop in value, and real estate or stocks will reassert themselves. Until that time, however, one must adapt oneself to the times. Having a personal set of coaches to teach us is the ultimate gift we can give ourselves, and this is not only possible, but readily available, below.

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