Financial Markets Can Make For a Comfortable Retirement and Other Lies to Distract the Individual Investor
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While it’s a great decision to prepare for your retirement, many strategies used by people are really counterintuitive when it comes to maximizing their returns over the long-run.
One of the biggest lies told by IRA custodians is that investing in conventional financial markets is one of the best ways to prepare for retirement—because these are safe investments.
See, a great investment plan maximizes your returns while spreading the risk across your entire portfolio, and sticking to just capital markets isn’t the way to achieve it.
Now, more so than ever, there is very little reason for anyone to stick with financial markets or invest in bonds.
Considering the likelihood of economic recession, global financial markets are standing on a precipice that will carry everyone and their money in with them. The point being—investing in stocks and bonds can’t help you prepare for retirement.
The Problems With Conventional Investments
Anyone who’s ever debated whether they should get an SDIRA or go with a conventional IRA will understand the limitations of working with traditional investment instruments.
If your goal is to create a nest egg for retirement and to maintain multiple revenue streams after— stock markets don’t deliver the required level of returns.
Decreasing Annual Returns and Rising Inflation
Stocks are priced based on their historical annual returns, but people don’t know how those averages are calculated.
This information gap allows many reports to technically misrepresent the values of the stocks by reporting averages over periods that yield higher returns.
For example, CNBC indicates that the annual returns over the past 90 years average at 9.8%—changing the duration to 20 years reduces the returns to 4.5%.
These figures often don’t account for rising inflation, which devalues these returns on a year-on-year basis.
Global real interest rates currently hold at 3.41%—this implies that the real returns on stocks are 6.39% over 90 years and 1.1% over 20 years.
The fact of the matter is, you’re really not making a lot of money on your investments, and they won’t rise anytime soon.
Implications for Retirement Earnings
Considering the falling rates of return over the years, your nest eggs and portfolios are lowering in value even as we speak.
The decrease in valuation will become even more pronounced once we near a recession and the stock market plummets when people panic.
This is not a time when anyone should be relying on investment bonds or conventional stock markets because the rising inflation can drastically devalue these holdings.
Without significant hedges against inflation and through diversification in alternative investments, you restrict yourself to low earnings at the least and put yourself at a higher risk of bankruptcy.
Lessons for the Investors
A solid financial plan is one that takes into account future economic circumstances and capitalizes on existing opportunities in the market.
Considering the inverse relationships between stocks/bonds markets and commodity markets, there is no better way to balance out your risk than evenly spreading your investments between the two.
Even now, gold markets are hiking, owing to global economic circumstances and indicating decreasing returns from the stock market.
If you want to retain their wealth in the long-run, you move into “risky” alternative investment markets, even though these ironically help you reduce your overall risk.
Even now, gold markets are hiking as people pull out of stocks and securities to move into gold markets.
The latest reports indicate that gold prices increased by 16% over the last quarter, and heavy demand from central banks across the world will only make these prices higher.
Once you’ve created a sizeable hedge with gold holdings in your retirement portfolios, you’re more likely to generate greater wealth than with just stock investments.
We also offer help setting up previous metal vaults and home storage services for your gold holdings.
Get in touch with us today for more information on our services or to hire us to acquire gold for your IRAs.