Tuesday, April 29th, 2014 @ 5:49PM

By Dennis Miller

What is it about retirement that causes confident, successful businessmen and -women to lose that edge when they invest their own life savings? Many otherwise dynamic people become virtually impotent in the face of retirement investing. I have many friends who were very effective in business—folks who made sound decisions affecting how millions upon millions of dollars were spent. They would gather the facts, make a plan, and make the right call with confidence. Whywas it so taxing for these same friends to manage their personal retirement accounts?

I’m a staunch advocate for gathering around the kitchen table to hash out problems and pass on life lessons. It’s where we gathered as a family to open our mail, pay the bills, and teach (and worry about) our children. I might even say that everything we needed to teach our family about economics, we taught at that kitchen table.

The secret is there is no secret. Investment gurus, stockbrokers, and talking heads like to use fancy words to dazzle. Many would have you believe their university or Wall Street pedigrees give them investing powers outside of your reach. Though many do have a little more knowledge or a little more experience, there is no need to be intimidated by the mystique.

Why? Because you already know most of what you need to know. The underlying principles for protecting and growing wealth during retirement are the same principles that allowed you to make and save that money in the first place.

When former Federal Reserve chairman Alan Greenspan would talk to Congress, many bright people would look at each other and think, “What the hell did he say?” If folks like Greenspan are so darn smart, why couldn’t they predict or prevent the Internet or real estate boom and bust? Why can’t they speak plainly? Don’t let anyone’s “elite” status overshadow your own common sense.

For the last few years, the Federal Reserve has been printing a 100-year supply of money annually. No one needs a PhD in economics to grasp the potential for high inflation. A little knowledge of history and a bit of common sense will tell you where we’re headed.

The key to using kitchen-table economics in retirement is to apply the same fact-finding and research skills that made you successful in business. If you are uncomfortable making an investment decision, continue to educate yourself until you are. Of course, it’s sensible to take in input and ideas from experts. Just don’t get caught thinking they have any magic bullets.

If you ask four people to define “rich,” you would likely get four different answers. As we move into retirement, the definition tends to be more practical and realistic. “Rich” is enough money to live comfortably without countless hours of financial worry. It’s also a feeling of pride in the lifetime of work that built your nest egg and an appreciation for each and every trip you get around the sun.

How much do you have; how much do you need to earn to supplement your retirement income; and, how can you invest safely to reach that goal? Retirement investing is no more complicated than that. Simply put, it’s living within your means and protecting what you have.

If I could shout one piece of encouragement to retirees, it would be: Don’t let the fear of losing money immobilize you! Doing nothing can be just as dangerous as risking too much on a speculative or even downright foolish investment.

You may recall the old adage about the banker who never made a loan because he was afraid he might lose money. When the bank went out of business, he claimed it wasn’t his fault. After all, he never made a bad loan during his tenure.

To make your retirement money last, you have to take on some risk. There are, however, proven ways to limit that risk to manageable doses: sector, geographical, and political diversification, trailing stop losses—the list goes on. Good investors will lose money from time to time and learn from their mistakes. You just need to learn and make the right judgment call more often than not.

Don’t fret when others brag about how well they’re doing. Each year financial newsletters, mutual funds, and investment managers like to boast about how much money they’ve made their clients. Accountability is a good thing; we’re certainly proud of our own track record.

Though, when I see the list of top-performing funds ranked by the amount of annual return, my first questions are: How much did they risk to get there? Have they performed that well consistently? How much of those profits were eaten in fees?

Some mutual funds occasionally produce nice gains for their shareholders. I, however, would put my money on the well-educated grandfather investing from his kitchen table in Iowa any day of the week. Why? A recent report indicated that 78% of all US domestic equity funds were outperformed by their benchmarks during the past three years. Large-caps were worse, with 86% of falling short of their benchmarks. Benchmarks are the indices in the sectors funds specialize in, respectively. In short, there are countless statistics indicating that you can invest just as well as a fund manager.

Those numbers should embolden you, not frighten you. I shared them to keep things in perspective. There is no magic wizardry, secret code, or special knowledge. All investors gather facts, make an evaluation, and then allocate some money based on what they think the future will bring. Those are skills that can be honed through education and experience by smart folks sitting at their kitchen tables or in their home offices.

I’m happy to report that the most frequent comment we receive is that our newsletter explains investments in plain English. There’s a reason for that: the investments well suited for a conservative investor’s retirement portfolio are not that complicated.

You can overcome retirement impotence. The best way to build your confidence is to learn ways to invest safely. We think teaching our premium subscribers about protective mechanisms like asset allocation, diversification, position limits, trailing stop losses, and internationalization is just as important as the individual picks in the Money Forever portfolio. If you’d like to learn more too, sign up for a no-risk trial subscription today by clicking here.

Posted by AIA Research & Editorial Staff
Categories: AIA Newsletter