The Ideal Retirement Portfolio

[Early to Rise]

Title: Early To Rise

The Internet's Most Popular Wealth, Health and Wisdom EZine

www.earlytorise.com Tuesday November 9, 2004 Message #1254
"Sooner or later I'm going to die, but I'm not going to retire." Margaret Mead
Some good advice from Donald Trump Charlie's new favorite food Stop complaining! What you -- and your money -- should be doing when you "retire"	The best investment Denise Ford ever made Something you need to know before you try to work with a printer The difference between "bullion" and "bouillon"
Advertisement Retire this year... and still make more money than most doctors! You can do it... once you know the proven secrets to writing a simple letter. You could be in big demand, earning big money, writing just a few hours a day from anywhere in the world you choose to be. Here's how you can learn the secrets of this little-known, lucrative business. http://www.thewriterslife.com/ph/etr1   Wealth How to Impress People Who Could Advance Your Career Much of The Donald's new book, "Trump, Think Like a Billionaire", is pretty superficial. But it may be worth buying just for his advice on how to meet and impress important businesspeople. Basically, Trump gives seven "rules": 1. Be on time. 2. Do your homework 3. Research those whom you will be meeting. 4. Remember names. 5. Be honest. 6. Let other people talk. 7. Be self-deprecating, not a bulldozer.   Health Lettuce Wraps on a Roll by Charlie Byrne I've got a new favorite food and, who knows, you may like it too. I'm talking about those Oriental-style wraps served in iceberg lettuce "cups," featuring stir-fried chicken, shiitake mushrooms, and water chestnuts. Maybe you've seen people ordering them at P.F. Chang's or The Cheesecake Factory. Most folks get them as appetizers, but you can make a main meal out of two or three. They're very flavorful and have an interesting crunchy texture. They're also inexpensive and make good leftovers for lunch the next day. You can easily make them at home. Search the Web for "recipe Chang lettuce wrap." One tip though: If you want to keep the carbs down (and you should), leave out some of the sugar-laden "hoisin" sauce.   Wisdom Are You to Blame for Your Own Limitations? "You'll find that life will be a lot easier and much more fun when you make the decision to drop your complaining. All it does is make you feel sorry for yourself -- sad, angry, victimized, suspicious, and/or self-righteous. When you argue for your limitations, your thoughts and words merely get in your way and greatly interfere with your ability to create. With complaining out of the way, you'll create the space for an explosion of creativity. All it takes is a simple decision: the decision to stop yourself from falling into the complaining habit. At first, it may be difficult. Don't worry. You'll quickly get used to the nicer feelings that come from a life without complaints." (Source: "Don't Worry, Make Money" by Richard Carlson)   Advertisement 'Forbidden' Investments Four 'Taboo' money-makers, reserved for the wealthy and well connected only - and strictly off-limits to you... Until Now! These and many of the other best investments and financial strategies in the world are HIDDEN from you by a cartel of regulators & special interests! Yet one group has broken past the CENSORSHIP, seeing gains of 797% and 1,794% in the bear market... legally slashing their tax bills... building an iron wall of protection around their assets... and creating a lasting legacy of wealth for their families Here's how you can do the same... Learn more:   Today's Message The Ideal Retirement Portfolio: Good Returns. Little Work. No Worry. by Michael Masterson Last week, I told you where to put your money if (1) if you have less than $100,000 to invest (in Message #1248), and (2) if you have more than $100,000 but less than you need to retire (in Message #1249). Today, I'm going to give you the ultimate retirement portfolio. And this will be coming from someone who has already retired . . . twice! But, first, I'm going to start by saying this: You SHOULDN'T retire. Forget about the fantasies you have about spending your golden years basking in the sun, putting around a golf course and/or visiting exotic tourist destinations with your spouse or temporary "playmate." Although you've had a lot of fun indulging yourself in such activities before, they won't keep you happy in retirement. To sustain your personal happiness for any length of time, you need a sense of purpose. Amusing yourself is not a purpose. So whatever you may think you want to do now, keep this thought in mind: You don't want to retire from a purpose-driven life. In fact, there are two very fundamental needs you need to meet in order to have a successful and enjoyable retirement: 1. Meaningful work. 2. Sufficient income. Meaningful work can include the time, energy, and love you give to your family, your friends, or strangers. It can include projects you care about and hobbies that inspire you. It can involve volunteer work or part-time employment. But what it must include is something only you can provide -- your heartfelt belief that what you are doing means something. Sufficient income depends on your lifestyle. In previous messages, I've suggested this very simple formula for deciding how much money you need to retire: Figure out how much you spend each year to maintain your current lifestyle. Add to (or subtract from) that number what you'd need (or not need) to have an enjoyable life in retirement. And multiply that number by 10. If you can be happy on a pre-tax income of $100,000, you'll need a retirement nest egg of $1 million. If you think you'll need about $300,000 a year (again, pre-tax) to live your dream life, you'll need about $3 million in savings. If you are smart, when you hit that number, you'll radically change your life so that you can have more time to enjoy those things that really matter to you. Let's assume that you are there already. How should your retirement portfolio be set up? My recommendation is very simple. I suggest you have your wealth invested in a combination of: 1. stocks and stock index funds 2. fixed-income instruments 3. managed rental real estate 4. precious metals 5. cash 6. play money Let's take a look at these, one at a time. 1. Stocks and Stock Index Funds: As I've pointed out before, you won't need much money in stocks if you have a reasonable amount in real estate. On the average, stocks will give you a 10% return. Real estate should give you more than that. I will probably never have more than 10% of my money in equities (of any kind), because I don't get any enjoyment out of equity investing. But for people who do like the fun of watching the stocks they pick go up and down, I believe a 20% commitment is reasonable. I wouldn't recommend more than that -- even for a 50- or 60-year-old retiree. Why? Because the stock market, generally (and individual stocks, especially) is unpredictable in the short term. And when you are living out your golden years, everything is short-term. 2. Fixed-Income Instruments: I like bonds. Even in today's low-yield environment. Quality bonds give you the peace of mind that you should be looking for in retirement. I like all sorts of bonds, but I'm particularly fond of municipal bonds. They are very safe and offer tax-free income. So a return of 4.5%, for example, might be worth as much as 7% if you are in a top tax bracket. The thing I like best about bonds is how simple they are. If you hold them till they mature, as I do, they are the perfect, zero-hassle, zero-worry investment. You know what return you are getting when you buy them . . . and that's the end of it. Bond funds are a good alternative if you want to diversify a bit. Like individual bonds, they can give you a fixed rate of return, simplicity, and peace of mind. What percentage of your retirement portfolio should be in bonds? If you have enough money to live well off a yield of, say, 4.5% or 5% after taxes, you can have most of your money in bonds. My closest financial adviser, Sid, has all his retirement funds in bonds. Chances are, you will need to earn a higher return. If so, I recommend allocating between 40% and 50% of your funds to bonds. 3. Managed Rental Real Estate: Rental real estate can offer some very impressive rates of return -- depending on how you measure them. A $75,000 investment in a triplex 10 years ago in my hometown in South Florida would be worth about $300,000 today. With a net rental yield of about $20,000 a year (after property taxes, upkeep, and management fees), that investment is earning either 27% or 7.5%, depending on whether you calculate from the original investment or the appreciated value. In a case like this, you might be better off selling the property and investing the money in bonds. If you could get a 5% return and were in the highest tax bracket, your effective yield would be 7.5% or better. (These are very rough calculations. I'm not taking into account depreciation, continuing appreciation, other write-offs, etc.) But most of the real estate deals I bought seven to 15 years ago are producing rental yields of between 10% and 15% of their current (admittedly conservative) estimated value. That higher yield, combined with the continuing appreciation of property in general, is why I recommend a 20% to 40% commitment to managed rental real estate. 4. Precious Metals: I'm not a gold bug, but I do like the idea of having some bullion (see "Word to the Wise," below) hidden in a safety deposit box in case of emergency. I don't think you need a ton of gold -- I'm not that worried about what the future might bring -- but I do think having between 2% and 5% of your investable net worth in gold is a sensible approach. 5. Cash: We all need some cash "just in case." I recommend a sum that's equal to about three months' worth of what you typically spend. 6. Play Money: Retirement is supposed to be fun. And some fun -- not the best kind of fun, but some fun -- costs money. I'm not talking about money that you spend on golf and vacations. Your general retirement funds are supposed to take care of that. I'm talking about the fun of trying new businesses or converting passions or hobbies into profit centers. If you are good and lucky, you'll have fun and make some money. But if you don't make money with this portion of your portfolio, that's OK too.   Today's Action Plan You might want to save this article and refer back to it from time to time, as you're building toward your retirement portfolio. But I'm much more concerned that you heed my advice about how you should spend your time in retirement. To be happy, you have to have at least one meaningful activity in your life that you really care about. Something that gives your life purpose. Remember that . . . now and always.   Advertisement How To Get People To Send You Their Money! I know this seems crazy but it's not. It's not a scheme that you'd be ashamed to be involved in. And I'm not misleading you in any way. The claims I'm making are factual. They are all based on experience. Learn more: The ETR Question Of The Week What Is the Best Investment You Ever Made? Here's the way Denise Ford, Conference Director for ETR and AWAI, answered this week's question: "When most of us think about investments, we usually think about putting money in some profitable fiscal instrument. We imagine that this money will grow and help make us prosperous in our old age. "As a child of the 60s, I never held much stock (pun intended) in that sort of financial planning. I thought there were other, more collective ways to grow and invest resources. Fortunately, I was also raised to understand that what we believe is transitory -- a matter of our limited experience and education at any particular time. So it was no surprise (in fact, it was expected) that I would change my opinion as I grew older, read more, experienced more, and understood less. "I have invested in a variety of ways, but the single best investment I have made so far was purchasing a 1977 Toyota Corolla truck for $3,200 -- which I paid for in cash. It was slightly used. (All my vehicles are. I like it that way; there's never the panic of the first scratch or bump.) And I needed it to travel back and forth to graduate school. We lived in a small town in North Carolina, in the middle of farmland. The drive was about 30-40 minutes, and I usually loved every minute of it. That was the time when I would wind down from my ridiculously busy schedule on my way to our little slice of rural American life. Our neighbors were farmers and cattle barons and one 'curious woman who got a trick knee and some magic potions.' "I loved the contrast of the experiences at that time in my life. It taught me so much about diversity. And the importance of reflection before action. It was also the first time in my life that I used books on tape, and they have been a boon to expanding the horizons of my mind and imagination ever since. "That truck took me many places, literal and virtual. I miss it to this day!" What about you? What's the best investment you ever made? Let us know by posting your story (or your thoughts on the subject) on "Speak Out." Click on http://speakoutforum.com/forum/viewtopic.php?t=376 Sales & Marketing The ABCs of Buying Print When choosing a printer for your advertising materials, make sure that you get three quotes, each one based on identical written specifications. Unless you make the specs exact, the bids you get will be impossible to compare. Keep in mind that a print quotation is normally good for only 30 days. And you'll need to give the printer a reasonable amount of time to do the job (if you are concerned about quality -- and you should be). As a rule, add an allowance to any print-order quantity to make up for spoilage. Most printers will advise you on what is standard for the type of job you are quoting. Finally, involve your printer early on in the design process. Too often, marketing departments decide on specifications (size, paper quality, etc.) without first finding out what is available and therefore less expensive.   Word to the Wise Don't confuse "bullion" (BOOL-yun) with "bouillon" (BOOL-yon). "Bullion" is gold or silver -- whether it's in the form of bars, ingots, plates, or coins -- considered with respect to quantity rather than value. "Bouillon" is a clear broth. Example (as used in Today's Essay, above): "I'm not a gold bug, but I do like the idea of having some bullion hidden in a safety deposit box in case of emergency." Michael Masterson Copyright ETR, LLC, 2004 ALL CONTENTS OF THIS E-MAIL ARE COPYRIGHT 2004 BY ETR, LLC. ALL RIGHTS RESERVED: REPRODUCING ANY PART OF THIS DOCUMENT IS PROHIBITED WITHOUT THE EXPRESS WRITTEN CONSENT OF EARLY TO RISE. Protected by U.S. Copyright Law {Title 17 U.S.C. Section 101 et seq., Title 18 U.S.C. Section 2319}: Infringements can be punishable by up to 5 years in prison and $250,000 in fines. Are you having trouble receiving Early to Rise messages? 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