Innovative Advisory Group
Kirk has been providing wealth management services to individuals, executives, entrepreneurs, and their families, as well as businesses and organizations since 1999. He works with clients to advise them on financial planning, risk management, and portfolio management. He is also an expert at using a self-directed IRA or self-directed 401K to invest in alternative investments. He particularly specializes in alternative investments such as: real estate, precious metals (gold & silver), tax liens, horses, franchises, private company stock, start-ups, intellectual property and more. Kirk is dedicated to developing lasting relationships with all of his clients.
BA, Economics, Trinity College
For most investors the difference is minor. However, for astute investors, it could provide some great opportunities.
ETFs are effectively entities (most commonly trusts) that hold shares of different securities (stocks, bonds, and other ETFs) in that entity. This "pool" of securities is what ETF investors own. The sponsoring institution (e.g. Blackrock) creates shares of the ETF to allow investors to buy into this pool of securities. The sponsoring entity must buy enough of the securities in the ETF to accommodate new investors into the ETF. If it is done properly, the ETF should not have a premium or discount to NAV attached to it. This means that if every share of the ETF were to be liquidated every investor would get exactly what the current value is. ETFs tend to be more liquid due to this creation of shares.
CEFs (closed-end funds) are different. CEFs are similar to mutual funds except that there are only a limited amount of share outstanding (mutual funds create more shares of the fund in a similar manner to ETFs). New shares are not created when investors purchase them. Based on investor demand, this could create a premium over NAV or a discount to NAV. For astute investors, this can create a great opportunity to buy assets at a discount. Due to the limited number of shares outstanding, CEFs can be less liquid.
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The benefits of social security income depend on when you start taking them. As a general rule of thumb at approximately the age of 80, you will see the benefits of waiting. If you draw at age 62 you will get an aggregate total of the income received more than the other two ages (67 or 70) until around the age of 80 at which point the other choices would exceed the income benefits of age 62 draw.
Ultimately the question comes down to how long are you going to live. If you familial genetics allude to you living well into your 90s, then you should consider starting at 67 or 70 for your social security benefits. If you familial genetics show that you will probably not live past your 80s, then you should start your Social security income earlier.
Of course this is a general rule of thumb. Your situation may be different and there are multiple factors that can affect this decision.
Lastly, don't worry about inflation. Right now based on our research and current trends, inflation will not be a significant issue in the next 10+ years. Inflation should remain low for the foreseeable future. As a side note, generally you cannot try to predict how inflation will affect your social security benefits. It is likely that the government will make additional changes to social security in the next 10 years as well, so keep that in the back of your mind.
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You are worried about a lot of things, and rightfully so as you approach retirement.
Let me briefly touch on each one.
- First of all you should have an emergency fund. The purpose of this is to have safe money in case of emergencies. This is money that you take as little risk as possible, none if that were possible.
- You should diversify your assets into different areas.
- If you are concerned about inflation, you should focus on assets that do well during inflationary periods (stocks, precious metals, real estate, etc).
- If you are concerned about deflation, then you should focus on holding cash, and safe bonds that pay a reliable income.
- Invested funds. Your invested half should be focused on investments that can sustain you through retirement. Consider how you would be affected if the stock market crashed by 50% ( like it did in 2007-2009). What if it didn't recover like it did. Would you be able to handle this?
- If you are really concerned about safety, then focus on putting your safe or emergency funds into safe investments with little to no risk [ high yield bonds do not fall into this category]. This would include CDs, treasuries, high grade corporate bonds.
- You might want to consider getting professional advice. This is an important time in your life where you cannot afford to make a mistake.
A few side notes: We have experienced sustained inflation for over 60 years in the US. most people have only experienced this type of environment. While it may continue, don't make that assumption. Some people thought real estate prices would go up forever too. Consider how deflation could impact your wealth. Most people are not familiar with how deflation works. If this happens in the US then pay down your debt and don't try to "make" money. It is very easy to lose money during deflation. Sometimes the winner is the one who loses the least.
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Rather than looking for high risk stocks, look for high return stocks.
There are plenty of risky stocks out there, and many of them have not done well. Instead of looking for investment that match your risk, look for investments that are solid investments. Sometimes these investments are more risky, but you can assess each one based on your risk tolerance. Trying to match your risk level to investments that are risky just because you are young is a fool's errand. In general it is a bad idea.
I hope this helps.
There is no singular investment strategy...
The best thing you can do as a young adult is to learn about investing. Most people spend their life saving for retirement and they have no idea how to invest properly. Think about it this way, let's say you spend your entire working life saving till you are able to save $2,000,000 by the time you are 60 years old and you are about to retire. Then you make a huge blunder and lose 75% of it. Now you only have $500,000 to live the rest of your life. Sure this is a good amount of money, but it will give you a much different retirement than you might have been planning.
The best investment you can make right now is in your investing education. Learn as much as you can. Make mistakes while your errors are small, and you will have a much better outcome as you grow older and closer to retirement.
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