Monday, May 29, 2006

Good Assets to Hold

How do you tell a good asset from a bad one? Over your lifetime, it will change in perspective.

Gold is OK. Its not productive, it just preserves buying power no more. Keeping 10% in your portfolio shouldn't hurt you, its NOT an investment, it is a form of insurance.

Treasury Bills are excellent as a short term investment, but a rather poor long term investment. Backed by the US government. The three month, six month and one year bills are the easiest to manage. This is their web page
So, if you had $100,000 to invest in T-Bills you could basically invest $33,000 each month in 90 day t-bills over the course of three months and then when each individual issue came due, you would renew the T-Bill, otherwise it would dump into your checking account. That way you would have access to one third of your account in any 30 day period if you needed it.

Rental property is an excellent investment if you can buy it for 100 times the monthly rental. If it rents for $1,000 per month, and you have 20% down invested. After 20 years, you'll have it paid off, and the rental income is inflation biased. Two Units and your retirement will be comfy. If you can buy at this price ratio, you can afford to have it managed, which will help you with your blood pressure, its defiantly not for everyone.

A home can be a store of value, if you bought it before the price surge and its about paid off. With this this asset, you really don't need gold, your home has the same hedge against inflation as gold.

Stocks that pay dividends and have a good 20 year track record are another good investment strategy. Take delivery of the certificates. Do not leave them in "The Street Name." It was so nice during the crash of 1987 to walk into a full service brokerage house and sell a stock in 2 minutes, while you couldn't even get a discount broker on the phone, the lines were busy.

New Item I saw the other day, Union Bank is offering FDIC IRA accounts. It seems you can spring board from there into Mutual funds Stocks etc that are privately insured.
If your about ready to retire, looks like a safe way to protect your account, the total FDIC insurance limit is $250,000.

Things that I would avoid;

Any government sponsored program that give you a tax break or changes the way you do business. The main reason for this, is that the government is always changing the rules. Plus most of the money in these Ira's etc are not FDIC insured. They are privately insured by the SPIC. Here is a quote from my brokerage account,

"SPIC insurance is for funds held at brokerages. It insures your
funds against the brokerage going bankrupt, but does not insure
the value of your investments."

Mutual funds, the biggest game in the world -- have never seen a REAL bear market. Say you have $100,000 in one and the stock market takes a dive. They mark it to market and post the results to your account, now you have $20,000. Closed End funds have another peculiarity, they can trade below the price of the items held in the fund. Two of my friends lost over $100,000 each with their mutual funds in 2001. One even postponed his retirement because of it.

Avoid gold and silver storage institutions and or gold and silver certificates of ownership. I have no real issues with this group, but I emphasize the words "due vigilance." There is nothing worse than being too trusting.

Avoid second trust deeds, the economy is going the wrong way, and the spread between risky junk and t-bill's is so small, you're not getting much risk premium.

Things to consider, if your bank was to go belly up, your saving and checking accounts might not be accessible for a month or two. There might be a limit on withdrawal amounts like what FDR did in the '30's. You will have access to your safety deposit box, put some money away there.

I'm just touching on a few things, nothing written in stone, just experience mixed with common sense.

1 comment:

Anonymous said...

Try for U.S. Treasuries.