In the updated 2017 nest egg pie charts, I have an important alert for the safe side. Bonds and money market funds are vulnerable. FDIC-insured cash is safer. Safe, income-producing hard assets that you purchase for a good price are best. Why do I say that and what does that mean? (Click to get your own personalized nest egg pie chart in my free web app.) Is there any safe investment that pays a good return (like 20-40%)?
Bonds are vulnerable. They have already begun losing value, and in the worst-case scenario they become toilet paper or illiquid (the airline industry, auto manufacturers and Greek bond “restructurings” are examples). In today’s Debt World, this is a real consideration. Read my blog, “The U.S. Treasury Secretary is Using Extraordinary Means to Pay Bills” for more information on the risks of investing during such a highly-leveraged time. There are two aphorisms to remember when it comes to bonds today.
“I am more concerned about the return of my money than the return on my money,” Roy Rogers.
“Never reach for yield.” It’s hard to know who first coined this one. (If you know, please Tweet me.) But it has been said by many a wise woman and man over the years.
Money market funds now have redemption gates and liquidity fees. That means exactly what it sounds like. There could be times when you have to wait or pay to have access to your money.
Cash is vulnerable, too. When there is a shift in global currency trends, it takes a lot more cash to buy things. Inflation can whip up out of nowhere. We’ve already experienced that in housing, where many markets are simply unaffordable to 90% of the population.
So what are safe, income producing hard assets that you can purchase for a good price?
Let me stress that every single word in that sentence counts. The first thing that you might be thinking is buying a house and renting it out on AirBnB. I’ve known many a exasperated landlord who would warn against it. You definitely have to know what you’re getting into, including renter rights, before you become an income-property owner. You’ll also need to set up a business entity to protect yourself, and account for expenses and payments to independent contractors. But income property is not the first or best hard asset to purchase! (Be sure to read this blog to the bottom.)
When I did my first Investor Empowerment Retreat in Cocoa Beach, Florida back in 2013, as we were playing the Billionaire Game® on the beach at dawn, we noticed a group of guys dressed up like Vikings. They were there to launch a satellite at nearby Cape Canaveral, and were doing an early-morning team building exercise out on the sand. (Drinking? Just kidding.)
Later that day, as we discussed the important considerations for purchasing a home or apartment building to rent out, I mentioned that I would like to buy a beach house in Cocoa Beach to rent out to Elon Musk and his satellite launch crew, when they come into town for space launches. At the time, the Cocoa Beach Beachfront Hilton rooms were going for about $99 a night. Today, just four years later, the rooms at the Cocoa Beach Hilton are often selling for $199 a night or higher. Why? Because there are so many satellite launches coming into town.
Since 2013, another consideration has been rising into the mix for Florida real estate – sunny day flooding. The entire Eastern seaboard is vulnerable to rising sea levels. According to the former Secretary of the Navy Ray Mabus, the naval base at Norfolk, Virginia is at risk if we don’t slow the rate of sea level rise. Sarasota realtors must disclose that rising sea levels could become a problem in that area within the next 15 years. Clearly, you don’t want to just have a great idea, and then purchase something that you might be stuck with until it is covered in water. Climate change is one of the reasons why I didn’t purchase in Cocoa Beach, Florida in 2013. Real estate is not a liquid asset (or one that works well underwater). You have to have a 10-year horizon at minimum when you think about income property.
There are a lot of homes in Cocoa Beach that were built during the first Space Race in the 1960s. They are pretty run down, and optimum for renovating. Due to high foreclosures and bank-owned property in the area, they could be a steal. Are they vulnerable to climate change? Is it worth it? These are some of the things that we are able to examine firsthand at the Florida retreat, which we aren’t able to do at the California retreats, where real estate has become unaffordable.
Some of the best income-producing hard assets aren’t those that earn you an income, but are those that save you money. Life has become unaffordable for many Americans, due to the high cost of basic needs, like housing, transportation, gasoline, electricity and food. There are many ways that you can invest and save, literally, thousands of dollars every year in your annual budget.
As just one example:
If you purchase solar panels for $20,000,
Take a tax credit for 1/3 of the costs,
And your electricity costs drop to $30/month, from $300/month,
It will take you four years to pay off the $13,200.
Thereafter your “yield” or return on investment is 24.5%, with $3,240/annual savings on electricity.
If you switch to an electric car and “fuel” it up with solar energy instead of gasoline, that could save you an additional $2,000 or more each year, putting the annual savings at $5,240 (or more), with a yield of 40% annually.
You just don’t get anything close to that ROI on any bond. Even junk bonds only pay 6%.
One important tip: always do an air-test on your home, insulate properly, and switch your light bulbs to LEDs, before you purchase your own energy system (like solar). Reducing your energy consumption is one simple trick that can cut your energy costs by up to 80% on its own!
These are just a few examples of how learning The ABCs of Money that we all should have received in high school transforms our life. Most people report earning back the price of the retreat in the first few months in budget savings alone. One retreat attendee is saving $20,000 each year! That allows you to live a richer life today, provide far better for your future, take more bucket list vacations and sleep better at night.
Wisdom is the cure.
Join me for an intimate, empowering investor educational, boardroom retreat in the beautiful beach town of Cocoa Beach, Florida, June 10-12, 2017 for a life transforming, fun 3-days, where you’ll learn great strategies for protecting what you have, keeping more of what you earn and thriving with a well-designed, easy-as-a-pie-chart investment strategy! Register by March 31, 2017 to receive the best price. Get a great discount when you come with a friend. Call 310-430-2397 to learn more.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.