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Friday, October 8, 2010
Regular readers of this blog know I am a huge fan of indexing. The evidence is overwhelmingly in favor of low-cost, low-turnover, "capture market returns" approach recommended by Buffett, Bogle, Bernstein, Ellis, Malkiel and many others--especially for those investing retirement assets.
In fact, I only work with clients who subscribe to this approach. Still, like those mentioned above, I believe that there is some room for individual stock picking for those willing to do the research. I allow up to 20% of investable assets for myself and my clients to be invested in this way. Some like to do research and find undervalued stocks. I like to think in terms of themes and the solutions to problems on a big scale. This was brought to mind by the post at "Invest It Wisely" where Kevin reviewed a new site solutionsauctions.com .
The problem I am interested in is considerably broader than the "how do I build a website" etc. you'll find at that site. I am interested in how the retirement problem in this country will be resolved. Recent estimates are that more than half of baby boomers will not be able to retire to a lifestyle they are used to. Many will be hard up.
Figuring out the path that will be taken, I believe, will result in an investment opportunity. Admittedly, I went down one dead end (so far) and came close to going off a cliff. I had convinced myself a few years back, when housing prices were moving steadily higher, that reverse mortgages would be the key (I know: reverse mortgages are laden with fees and an area where abuses can occur). Still, it seemed to me that they were, in some cases, the only thing standing between some seniors going hungry etc. and living normally. The unlocking of home equity seemed to be a key. At the time, I read a lot about CountryWide Financial and how they were coming up with some clever innovations in this area and thought they would be a great investment. Looking back, I clearly dodged a bullet.
Still, the same problem is out there. I should say, up front, that I believe I have an advantage in thinking this through in that I have always considered myself everyman from the perspective of if I like something or am thinking along certain lines, then many people are doing likewise.
Along this vein, I have been thinking of motor homes. I have talked with the wife about selling our home (on which there is no mortgage) and buying a motor home. This will result in a nice chunk of money for retirement that actually, unlike the IRA, can be drawn down tax-free. With the motor home, we can spend 4 months visiting my son and daughter-in-law in Alaska, then spend some time down South and make our way to Assateague camp grounds in spring to be near my oldest daughter and son-in-law in D.C. This solution frees up investment funds and enables the newly retired a way to visit children who might be scattered around the country and live fairly cheaply. Is this a solution?
To get specific, should I take a position in Winnebago, or is there some other way to play this? Winnebago now looks pretty ugly and is losing money. What do you think? Is this a solution for many to a looming retirement crisis? Remember, we are not a generation that adapts well to hardship.