Is Your Roth IRA Investment Serving You Well?
To use the words of Warren Buffet, a Roth IRA investment should never "lose" money.
Buffet says that is the first rule of investing.
He says the second rule is to never forget rule number one.
How are your Roth IRA investments performing? If you are like most people (about 95%), your choices were stocks, mutual funds or bank CDs.
Those are not the only choices for a Roth IRA investment, but they are the only ones offered by the majority of custodial companies.
Only companies like Equity Trust and Pensco, providers of truly self-directed accounts, offer more options.
So, assuming your Roth IRA investments relied heavily on stocks and/or mutual funds, you probably broke Warren's rule and lost money over the last year.
18-20% was the average loss.
Now, you'll probably have to wait a while to recoup some of those losses, else you'll lock in that loss.
That's why most advisors are not suggesting that you make sudden change right now, but in the future, you may want to be a little more careful.
But, most advisors suggest that bank CDs and government bonds are better choices, because they are insured by the federal government.
That makes them safe.
When you consider the rate of inflation, those are not really safe choices.
A Roth IRA investment must earn more than 5% annually, just to prevent the loss of "value" caused by inflation, which has to do with your dollar's buying power.
When we were averaging a 3% inflation rate, a bank CD was worthwhile.
With average return rates between 3 and 4%, you could earn a little with a bank CD, just not a lot.
But, now, the 20 year estimated inflation rate is 5%.
So, it might look like you are not losing money with a bank CD, but since your dollars are worth less, you've lost buying power.
The higher the value of your account, the more buying power you are losing every year that you stick with bank CDs as Roth IRA investments.
Treasury bonds are even worse, because they earn less than 2% per year.
Those who are self-directing their Roth IRA investments have the option of buying real property that does not devalue over time.
Therefore, they are not losing buying power to inflation.
Those people that have made the best choices and fully diversified have seen gains of 30% or more per year.
Reports about decreasing home values and a growing number of foreclosures might make you think that real estate would not be a good Roth IRA investment.
But, there are portions of the housing sector that are largely underserved.
People need "affordable" and over the last decade, the number of attractive affordable homes has steadily declined.
If you join the right group, your Roth IRA investments can help people and communities around the country.
You are also guaranteed not to lose money.
A Roth IRA investment can allow you to accumulate tax-free wealth for your future.
You just need to learn how.
Buffet says that is the first rule of investing.
He says the second rule is to never forget rule number one.
How are your Roth IRA investments performing? If you are like most people (about 95%), your choices were stocks, mutual funds or bank CDs.
Those are not the only choices for a Roth IRA investment, but they are the only ones offered by the majority of custodial companies.
Only companies like Equity Trust and Pensco, providers of truly self-directed accounts, offer more options.
So, assuming your Roth IRA investments relied heavily on stocks and/or mutual funds, you probably broke Warren's rule and lost money over the last year.
18-20% was the average loss.
Now, you'll probably have to wait a while to recoup some of those losses, else you'll lock in that loss.
That's why most advisors are not suggesting that you make sudden change right now, but in the future, you may want to be a little more careful.
But, most advisors suggest that bank CDs and government bonds are better choices, because they are insured by the federal government.
That makes them safe.
When you consider the rate of inflation, those are not really safe choices.
A Roth IRA investment must earn more than 5% annually, just to prevent the loss of "value" caused by inflation, which has to do with your dollar's buying power.
When we were averaging a 3% inflation rate, a bank CD was worthwhile.
With average return rates between 3 and 4%, you could earn a little with a bank CD, just not a lot.
But, now, the 20 year estimated inflation rate is 5%.
So, it might look like you are not losing money with a bank CD, but since your dollars are worth less, you've lost buying power.
The higher the value of your account, the more buying power you are losing every year that you stick with bank CDs as Roth IRA investments.
Treasury bonds are even worse, because they earn less than 2% per year.
Those who are self-directing their Roth IRA investments have the option of buying real property that does not devalue over time.
Therefore, they are not losing buying power to inflation.
Those people that have made the best choices and fully diversified have seen gains of 30% or more per year.
Reports about decreasing home values and a growing number of foreclosures might make you think that real estate would not be a good Roth IRA investment.
But, there are portions of the housing sector that are largely underserved.
People need "affordable" and over the last decade, the number of attractive affordable homes has steadily declined.
If you join the right group, your Roth IRA investments can help people and communities around the country.
You are also guaranteed not to lose money.
A Roth IRA investment can allow you to accumulate tax-free wealth for your future.
You just need to learn how.