Investments for the slightly paranoid?

[amelia]

I find on this board a lot of people who, like myself, think very conservatively about money and who have a healthy paranoia about our economy. I have been thinking about a conservative investment vehicle suitable to maintaining and growing money dedicated to funding an eventual homesteading life, but I find the range of "conservative" advice to be a little mind-boggling. On one extreme we've got people over on Freedom talking about buying silver and fiat (whatever that is) and investing only in useful farm implements. On the other, I see financial advisors and investment books touting "low-risk" diversified portfolios of mutual funds with a stable return of 14 percent. I'd be very interested in knowing what the level-headed folks on this board think about all this.

[DAVID In Wisconsin]

We are fairly conservative when it comes to the money we manage to save. We have almost everything in the stock market and have for years. Our investments pay us a whole lot better than CD's. Over a 20 or 30 year period even 1% adds up. Personally, we do not do mutual funds anymore. The well hidden fees are too much for us. Most of these fees are so well hidden even a CPA cannot easily find them. Those fees greatly reduce the advertised return on investment. We do spend several hours a day (on average) researching stocks. We do stocks instead of other things because we like very, very liquid assets.

[Canucklehead]

Watch those management fees on the funds. A consistant 14% return sounds very nice, and I'd want to see the charts for myself but I'm betting thats before the fees of 3-5% come off the top.

Conservative funds with low fees are good. I like a good mix weighted with Energy and Gold.

With the US $ doing so poorly and the trade deficit so high, some physical gold is a very good thing to have on hand (literally) in the long term. If $$ and trade deficit keep going the way they are gold will be the most valuable asset. Gold is a great place to store money.

Keep in mind the apparent weak dollar policy the administration seems to like is probably good for the US in the long term. US debts are in US dollars so with the dollar low, the US can pay back those debts with foreign currency which is now worth much more.

I like gold. Look at the gold chart since 1970 when the US stopped backing $$ with gold. Plus it's shiny and nice to look at

[moonwolf]

If I had to do it again, I'de have done it sooner while working and forget about investing in anything but myself and resourfulness to make a self emplyed living eventually. Investment comes in many forms, and it's up to you to support the mindset that you it feels right to buy into mid or long term corporate investing via mutual funds, stocks, bonds, or interest bearing accounts. The last few years have shown many that these have setback risks maybe more than risking in yourself and efforts to run your own affairs with investments considering yourself the asset rather than externally in someone elses company.
You might take that in different forms, and perhaps may be a partnership or inventory or equipment or stock to proceed on your dream now rather than the fuzzy future. Do it while you are able and younger and let your efforts with that grow to value into the later years. Many can argue this wisdom, and it's not for everyone. But know that there are other choices to investment than what financial advisers lead us to believe. You might do much better investing in a tractor, for example and go from there with homesteading opportunities. Let other 'savers' help support a lifestyle and wholesome product that small care organic operations can provide. There will be plenty of those spenders caught up in the 'saving for the future' mode and keep the system going. I figure.

[agmantoo]

Land purchases in the path of "progress" afford the best returns for me. For short term stock investments with money that I cannot expose to excessive risk I like the power generating utility companies such as DUK... I look for some growth in the stock and like the dividends.

[Jane in southwest WI]

amelia,

to get a balanced view of investing and what is really going on in the economy I recommend a couple of websites:

http://www.financialsense.com

http://www.321gold.com/

Financialsense has a good radio broadcast every week with guest speakers - often well-known authors covering a broad range of topics dealing with investing in energy and precious metals, geo-polical issues affecting the global economy, real estate trends, etc. There is a lot of good information here you won't hear on CNBC or Bloomberg television. Or hear from your "financial advisors". There is a link to the upcoming schedule on the home page.

321gold has an editorial section with many articles on why precious metals are a good investment. What a lot of people do not understand about investing is that everything goes in cycles. Most people buy at market tops and sell after they've lost a great deal of money. It happens time and time again - people chase the last "big" thing, thinking it will make them money again, think they can't lose money in real estate and equities, and fail to see the next bull market ahead of time. After something like 20 years of a bear market in commodities (hard assets like silver, oil, coal, industrial metal, etc.) we are now in the beginning of a new bull market that could last a decade or more. And equities could go down to sideways for a decade or more. Nature has its cycles, why should markets be any different?

Fiat is the currency system we now have. Where the U.S. dollar was once backed by gold, it is now backed by people's faith that it is worth something.

[Mike in Ohio]

Amelia,

Try thinking through the options. Gold and silver might have been useful stores of value at some point. They were scarce and easy to carry. Same thing with salt back in the roman times. If things got really bad here do you think people would want gold or silver in exchange for food or other needful things? That would be foolish. When you go to spend (trade) that gold or silver at a later point you would have to pay more if anyone was willing to trade you for it at all.

You also need to consider that unless that silver or gold is held in a vault you would have to have it assayed when trying to sell (unless a private individual was willing to take your word).

Let's go to the other end of your spectrum. I've been investing a long time and I don't know of ANY "low-risk" funds that pay 14% on an ongoing basis in the past 5 years or so. I read Barrons, Businessweek, The Economist, Fortune, Forbes, Worth and I'm sure I'm leaving out a couple. You would count yourself doing extremely well if you could get 7%-8% from a "conservative investment.

Stocks,funds or ETFs are ok if you have some flexibility as to when you are going to cash out. For a shorter term horizon (I'd say less than 3-5 years) your risk with these types of instruments are magnified.

When you say "funding a homesteading life" are you referring to purchasing a property, providing an income or ?? It also matters as to what your time frames are both for the investment and what you want to do with it.

It may be that putting your money into a ROTH IRA is a way to go to increase returns and decrease taxes.

I'm partial to ETFs. These bring the benefits of mutual funds but trade like stocks. This means you don't have to worry about capital gain/loss issues associated with mutual funds. You can buy various sectors including country funds. The downside is that you have to buy shares in lots of 100.

Rather than looking at just this investment, you need to think about how it fits into your other plans and investments.

As usual, just my 2 cents.

Mike

[moonwolf]

Originally Posted by agmantoo

For short term stock investments with money that I cannot expose to excessive risk I like the power generating utility companies such as DUK... I look for some growth in the stock and like the dividends.

This is where my reasoning sort of differs from the 'norm', I guess. Rather than investing in the utility company, I would like the idea to choose investing money in a solar or wind turbine system on the land you own. That way you not only are resourcing the investment in yourself, but also are decreasing enegry cost with is like taking money to the bank. The key here is inveting for a time frame that the investment in the solar or wind generator has a payback period for the energy cost saved.
In other words, if you 'save' by buying stock in an energy generating utility, and you pay out the other end to buy energy.....where is the actual savings over time????

[Laura]

I am one of those conservative, invest in beans and Bibles people. I was discussing conservative investments with a friend who is an investment banker. He suggested CDs and government bonds.

We discussed the future of real estate, the bubble and long term bubble proof investments and what he was investing in. Unimproved rural land. One of the best invesments in our state is the purchase of 60 acres or more of Olympic Peninsula clear cut timberland. Buy young and pay it off quickly. In 40 years at retirement age, you have mature prime timber ready for harvest. Even our trash trees bring in top dollar.

I believe the time to invest in precious metals was 30 years ago and now would be a good time to sell.

[Mudwoman]

What few stocks we have left we are invested in purely for the substantial dividend they pay. We have some gold and silver American Eagles and we have some old silver coins-----pre 1964. We have some money in CD's getting pathetic returns, but it is liquid and better than what a passbook savings is paying. Investing in stocks for the potential of them going up and making money is not very conservative in my opinion right now. Any extra money we have to invest right now is going into our property in the way of improvements and additional silver coins.

[AKR]

i wouldn't touch precious metals...again. when i was a kid, i put about $900 into a gold company; almost 10 years later, it was worth about $200, and continued going down. i'm no expert in financial investing, but i've read a LOT about it, and one of the big no no's i've read about over and over is investing in gold or silver.

i think the best thing you can do is learn to become as self reliant as possible. if the sh*t hits the fan (ok, it already has, but it can still get worse), make sure you can grow your own food and supply your own heat.

[antiquestuff]

AKR-you should have put the $900 in actual gold, not a company. That said, I think the best metal is silver-more practical, and far more useful for making things than gold.

[moonwolf]

Originally Posted by antiquestuff

AKR-you should have put the $900 in actual gold, not a company. That said, I think the best metal is silver-more practical, and far more useful for making things than gold.

As far as a homestead investment regarding metals and such tangibles, my thinking has differed from my past thinking on this. If I had funds to invest in metal, it might be useful long lasting iron machinery implements or tractor. Get it good used, and it may be useful for a long time to come to get an increase of the investment out of it by using it. Even if it depreciates over the time you've used it, the percent made could be higher than the risk of hold silver. I like silver and gold, but it's not something I would dig in the ground with or use as roofing shingles for a dwelling that could harness better investment potential.
I guess my mindset is not going to convince the paying of the salary of too may financial planners out there. So be it.

[Jane in southwest WI]

Originally Posted by Mike in Ohio

Amelia,

Try thinking through the options. Gold and silver might have been useful stores of value at some point. They were scarce and easy to carry. Same thing with salt back in the roman times. If things got really bad here do you think people would want gold or silver in exchange for food or other needful things? That would be foolish. When you go to spend (trade) that gold or silver at a later point you would have to pay more if anyone was willing to trade you for it at all.

Mike

Gold and silver are real money. Always have, always will be. Paper money and stocks can and have become worthless. Gold will never become worthless.

[Jane in southwest WI]

Originally Posted by Laura

I believe the time to invest in precious metals was 30 years ago and now would be a good time to sell.

If you bought 30 years ago you should have sold near the top of the last bull market - in 1980 when gold hit $850/ounce. Then you could have bought in 1999 when gold was around $250.

Gold will probably break through its old high within the next few years.

Buy low, sell high.

http://www.mrci.com/pdf/gc.pdf

[Mike in Ohio]

Originally Posted by Jane in southwest WI

Gold and silver are real money. Always have, always will be. Paper money and stocks can and have become worthless. Gold will never become worthless.

So, if things really headed south, who here would accept gold and silver in exchange for the crops they produce? Personally, I would barter for things I can use rather than shiny metal which I have limited or no use for.

I'm real curious as to whether people would take gold or real goods if the economy tanked and paper money crashed.

Mike

[Laura]

Originally Posted by Jane in southwest WI

If you bought 30 years ago you should have sold near the top of the last bull market - in 1980 when gold hit $850/ounce. Then you could have bought in 1999 when gold was around $250.

Gold will probably break through its old high within the next few years.

Buy low, sell high.

http://www.mrci.com/pdf/gc.pdf

I bought at $60/ounce in the late 70s and sold when I needed quick cash in the early 90s. It was a tidy profit. It is not something I will buy again as I truly am a beans and bible investor.

Mike, when we go into the season of drought famines and plaques, all the gold in the world will not buy a bag of beans or a spent hen. You will get a free Bible, though.

[Laura]

In talking investments with my friend, the subject was investing for our children's education. Education is the best investment you can make, but not neccessarily at the overbloated sheepskin factories. It is the real skills and knowledge, the practical application and experience that are valuable, not the degree.

[duke3522]

I agree that in the beginning of societal disruption gold and silver will not have the value they have now. And if things ever really go south 22 long rifle and 12 gauge 00 buck shot will be the new coin of the realm. However, gold and silver will have their place. Ancient societies did not value gold and silver just because they looked pretty. Both have many uses that have been taken over by cheaper high tech materials. However, when these materials are no longer available gold and silver will once again become very useful.

JMHO
Duke

[Mike in Ohio]

Duke,

I'll grant what you say is true. I'd still argue that the timeframes are such that someone would be better off investing in something that is productive (farmland, equipment, etc).

Mike