We have all heard stories of the little old lady who bought Walmart stock over the years and now has millions of dollars. The truth of the matter is: in my brief existence I have seen very few real success stories in the market. Much like the lottery, the stock market is the financial equivalent to the American dream of success. People are elated over the fact that the market has done so well these last couple of years, but in truth, the massive increase in stock values is really nothing more than the decreased value of the world’s currency. The inflation created from vast amounts of money ‘the Fed’ is printing decreases the actual worth of each dollar, which is the problem.
So, when we middle-classers store up our dollars for retirement using some kind of stock fund and watch over the years as that money rises and falls at the whim of the stock exchange, we are in the end lucky to get out anywhere near in real dollars what we have stashed away. Yeah, we may get a tax break at the time but later on pay dearly because our income is now in a higher tax bracket due to a tax table that is only moderately adjusted for inflation! I love it when the financial planners tell us what our savings will mature to, with steady, moderate growth, fueled by our hard earned monthly contributions. Most of the time this is nothing more than a pipe-dream used to entice people to send their cash to financial planners who makes considerable profit on the movement of money by way of fees that at times hard to understand. One need not go back too far in time to our recent recession that destroyed many retirement plans. Make no mistake about this, many people became rich during the last fiasco on the backs of the middle class.
I created this graph to show others that the idea of using gold as a hedge against inflation is only moderately successful. Using today’s price of gold and the inflation-adjusted price of gold in 1950, you may have increased your holdings by a factor of five. The problem with this is that inflation increased by a factor of 10. That means you lost 1/2 of your money’s value to inflation! That does not sound like a sound investment strategy to me.
I have taken the easy way out. I go to the Warren Buffet site and see what he is buying, buy it, and try to forget about it until Warren tells me to sell. His philosophy is quite simple: Buy good, strong companies that will be here for the foreseeable future and wait and hope you did enough homework to find success.
Oh My, I have to go out and get my mega-million-dollar lottery ticket before the drawing….Talk later.