A stockbroker I know recently asked me what "my approach" was to investing.
I didn't have an answer for him right away. But in discussing it with him, I realized that my approach has always been based on a combination of confidence and fear.
Early on, I had the confidence to believe that if I worked hard I could always earn all the money I'd need to live comfortably. So I knew I'd always have a safety net. At the same time, I was smart enough to know that I couldn't beat the market by being clever. So I invested conservatively and diversified. And it worked.
Still, I was afraid that something might happen that could devastate one or more of my assets. The government could confiscate gold, as it once had. A lawsuit could wipe out my cash, as it once did. My stocks could disappear in a market meltdown. Or a global warming tidal wave might cover the entire state of Florida and wash away all my Florida real estate holdings.
So I created a plan. I would separate my assets into six groups:
* Cash and cash instruments
Then I set specific goals for each group. (Actually, I set no goals whatsoever for my "other investments" group. I realized that I would never know enough about other investments to hope to make long-term money with them. So my intention was to go into them with the sole purpose of having fun -- expecting to lose every cent.)
My goal for cash was to have enough to live on for three years at my current spending level -- which would be enough for six years if I moderated my buying appetites.
My goals for gold, bonds, stocks, and real estate were more ambitious. For each of those four investment classes I wanted to eventually have enough money socked away to retire on. In other words, to have four times the money I needed to retire.
I know that seems insane. But, as I said, I was always afraid that any one or even two or three of my "nest eggs" could disappear due to some unforeseen disaster.
So by having four nest eggs to choose from, I'd reduce my chances of going totally broke.
I have never seen this approach in any of the financial planning books I've read.
I think the reason it is unique is because it was, as I said, so crazily ambitious. Financial planners don't write books for people as fearful -- and confident -- as I was.
That's why most of their advice is so ... so ordinary. They tell you to diversify with stocks and bonds at a 60/40 or 40/60 ratio, depending on your age. And they'd never give you the advice I give you for making lots of money: Work hard, work longer hours, and start businesses on the side.
Why? Because the financial media, in general, believe their readers are lazy. They think if they told their readers to work hard, their books and columns wouldn't be read.To make matters worse, these well-known and highly revered financial gurus ridicule writers like me who tell the truth.
Everyone needs to own some commodities in this financial environment. That's why I own gold coins and collectible art and houses and apartment buildings. I know those things can't disappear into some electronic black hole. I know where they are. I can see them. I can touch them.
I also like the idea of owning other commodities. Lately, some of the best performers have been in the "Energy Asset Class Category."
Oil prices have been climbing. And it looks like expensive oil is here to stay. I've been reading Investor's Daily Edge contributor Rusty McDougal's comments, and I am tempted by the possibility of controlling 1,000 barrels of crude oil in the futures market for about $6,600.
I'm also intrigued by the idea of buying call options on select energy stocks that could provide double- or triple-digit gains for as little as $200.
For me, this type of investing falls into my "other investments" category. Which means I have no expectations for it. I'll invest only what I won't mind losing. But if I make money, I'll be very happy.
If speculative investing interests you, I urge you to read more about Rusty's service and see if it make sense for your portfolio.
A good way to reach your retirement goals a little faster is to find a retirement paradise that is less expensive than the USA. If you can enjoy living in some other part of the world, you can get the retirement lifestyle you're dreaming of for a lot less money, even with the falling value of the dollar. (The latest numbers from the Social Security Administration indicate that nearly half a million Americans are already doing it.)
There are several countries known for cheap (at least compared to the U.S.) retirement living, including Costa Rica, Panama, and Mexico. Some sections have become so popular that the prices of property have shot up, putting them out of reach for the average person. But there are still opportunities out there.
My own retirement Eden is a beautiful property overlooking the Pacific Ocean in Nicaragua.
I spend long weekends there, sitting on my porch, the ocean stretched out below me.
My cost? For the land, I paid $22,000. I paid another $150,000 to build a spectacular 5,000-square-foot home, complete with a huge open-air living room and a swimming pool.
Water and food are dirt cheap. Household help is equally inexpensive.
The community is a 20-minute copter ride from the capital city, which is a two-hour hop from Miami. It is accessible via a highway (now being rebuilt), and is considered right in the middle of the country's next big real estate market.
Years ago, someone offered me $900,000 for my house. I didn't sell. My cost of keeping it is very low and the value of living there part-time is huge.
Consider investing in your own retreat now. The sooner you get in, the better you will do financially and the longer you will enjoy it.
Americans were raised on "three square meals a day." Most Americans are also overweight. So you might be interested to know that changing that time-honored habit can help you lose weight.
French researchers found that a group of people who normally ate four meals a day actually gained fat when they switched to three meals per day. A second group that did the opposite lost fat. In both groups, the amount of calories consumed remained constant.
When I am busy -- which is most of the time -- I can easily skip a meal. Today, for instance, I had a slice of bread and organic peanut butter for breakfast and nothing else but a protein shake until dinner. But now, I'm pretty damn hungry. So there's a good chance I'll eat like a horse at dinner. When you eat like that you can easily consume a day's worth of calories in a single meal.
I think that is one reason why four meals works better than three. You tend to eat smaller portions and you tend to eat better foods. You are not starving so you don't binge. And you don't have a sweet tooth for junk.
If you are eating only two or three large meals each day, consider splitting your food intake into at least four meals. Five mini-meals might be even better. That's what I've been doing lately.
The objective is to eat the same amount of food (or less) but spaced out throughout the day.
Here's my eating routine:
Meal One: 7:00 a.m., while editing poetry. Two fried eggs (organic). One piece of toasted hemp bread. Two ounces of fresh juice. Coffee. Water.
Meal Two: 11:00 a.m., while writing in my studio. A protein bar and water.
Meal Three: 1:00 p.m. or 1:30 p.m., after my workout. Protein shake. Iced tea.
Meal Four: 5:00. Chicken or tuna, greens and water.
Meal Five: 8:00. A well-balanced dinner.
When I eat this way, I feel energized all day. I never have a slump after lunch and I have plenty of pep at night to enjoy my evening at home.
If you've had success with this or another regimen, let me know. I'm always interested in hearing about healthy eating programs that work.
One of the most common mistakes investors make -- and I've been watching investors make mistakes for 20 years, so I know what I'm talking about -- is to trust their wealth advisers too much.
Who are your wealth advisers? The broker who recommends stocks to you. The financial planner who tells you how to balance your portfolio. And your accountant and your lawyer when they talk to you about your money.
You need wealth advisers. But you don't need them to make your decisions for you. The wise wealth builder takes a skeptical attitude toward advice. He recognizes that advisers make a living by convincing their clients that they know better. But that doesn't mean they do. The wise wealth builder also knows that some advisers are much more concerned about the status of their own bank accounts than those of their clients.
Listen to what your advisers tell you, but don't make your decisions solely on the basis of what they say. Seek out other opinions, including opinions from the editors and contributors of Investor's Daily Edge. Then decide for yourself. Nobody cares as much about your future as you do.
[Ed. Note: Michael Masterson welcomes your questions and comments. Send him a message at AskMichael@ETRFeedback.com.]
© 2009 Early to Rise, LLC.