Your Definition of Risk is Wrong

Are We About to Hit America's Final Unwind? America is heading towards an unprecedented economic crisis … and no one is talking about it. On Dec 23, 2013, a financial event is coming that could wipe out markets overnight. To find out how you can shelter yourself from this coming storm, click here for our urgent video report. Don't Fear the Stock Market… Fear Not Meeting Your Real Goals By Jeff Opdyke, Editor of The Sovereign Individual Dear Sovereign Investor Subscriber, Let's start with a bit of stock-market word association. I say "risk," you think… what? I imagine your initial thought is the risk of losing money when stocks go down. Given all that has happened since 2008 – and given the string of high-profile crimes on Wall Street in recent years – you can't be blamed for seeing risk in terms of your money vaporizing in the stock market. Your vision, however, is narrow-minded. The real risk you should be worried about these days isn't the risk of losing your money in the stock market. Your real risk is that you fail to meet your personal goals – be it the growth you need to build your portfolio in the run-up to retirement, or the income you need your portfolio to generate once you're already retired. That risk can do far more damage to your lifestyle than can the temporary price action of otherwise strong, stable stocks. Advertisement Get the hell out of the dollar NOW! The dollar is in the midst of a 'sucker rally'… And if you get paid in dollars and hold the majority of your assets in U.S. stocks or bonds, then you're wealth is in significant danger. This brief message may infuriate you... but as you'll see – I've found a solution that could get you through it all. Just go here for full details. The Real Risk For Retirees Isn't a Stock-Market Decline A lot of investors today either sit on the sidelines keeping their money in cash accounts, or they've rushed into the bond market, where they believe – oh so wrongly – that their dollars are safe. For fun, let's assume your principal is 100% safe in cash and bonds (and it absolutely is not). What is the return you're likely to generate off your money? In CDs, you won't find yields much above 1.5% right now, and that's stretching out five years. In Treasury bonds, you have to go out 30 years just to get 2.9%. If you're a retiree, or will be one in the next year, will assured returns of 1.5% to 2.9% help you achieve your goal? Most likely not. Worse, you take on three far-more significant risks that Main Street investors seem to be overlooking today: First, you assume inflation risk. Does anyone really think true inflation (not the hedonically adjusted inflation the government announces each month) will average 2.9% a year over the next three decades? If you see inflation as a potential bogeyman, then locking in today's low yields – all in the name of "safety" – assures that your money will grow increasingly incapable of funding your lifestyle in coming years. Second, you risk potentially meaningful capital losses in your portfolio. As interest rates creep higher – and especially if they lurch higher – the value of the bonds and bond funds you own will get crushed. That's not a guess. It's the simple arithmetic of the bond market: rising interest rates, by necessity, push down existing bond prices. Investors will freak out when that happens, and they'll sell their bonds and lock in losses, and then they will file lawsuits against mutual-fund companies because they've been lead to believe bonds are safe. I guarantee you will be reading that exact story in the financial media one day. Third, you face currency risk. I've hammered on this point for months, so I'll just say that when the dollar's long-term downtrend continues – and it absolutely will – cash and bonds priced in dollars will lose purchasing power here at home. So, where is your real risk today as a retiree? Is it meaningless paper losses in a portfolio of stocks built from really strong, stable companies? Or is it the risk that your portfolio doesn't generate the income you need to live comfortably in retirement because it's invested too heavily in cash and U.S. Treasury paper? Disregard me if you wish, but I guarantee you that your real risk is the latter … and those retirees who cling to the perception that risk is all about losing money in the stock market will discover just how wrong they are in coming years. And, sadly, they'll discover their error the hard way. Safe, Stable Yields of 5%, 7% or More… I'll say this very simply: You cannot afford not to be invested in stocks today. That's particularly true for retirees. As the cost of living rises – and especially as healthcare costs, and soon taxes, escalate – a source of income that meets those rising costs becomes paramount. CDs, money-market accounts and government bonds will offer no benefit. Only stocks will meet your goal. That doesn't mean your entire portfolio should be in stocks. But it does mean that even if you're 85 years old (which gives you a life expectancy into your 90s), you still need some portion of your portfolio that's generating real income. That means stocks. Right now I can get you yields of 5% to 9% in the stock market. These are in safe, secure stocks all over the world – some in the U.S., some in Canada, some in places like Singapore, Australia and Norway. I put Sovereign Investor readers into Malaysia's rice giant, Padiberas Nasional (Kuala Lumpur: PNL). It's a government-sponsored monopoly paying 7.2% at the moment. I've recently put Sovereign Individual subscribers into a U.S. Farm Belt stock paying more than 6% a year, a Norwegian industrial firm yielding 8% and a Singaporean real estate firm yielding nearly 9%. These aren't questionable companies, or companies with weak balance sheets and struggling businesses that portend a pending dividend cut. Indeed, each one of them has a strongly growing revenue stream and a healthy balance sheet. All are projecting stronger-than-expected earnings. Their dividends are either rising, or they have recently announced plans to raise their dividend. Score upon score of stocks like these exist all over the world today. I've built a long list of global stocks dishing up very fat dividend payments each year. These are the kinds of companies income investors should pack into their portfolio – good, solid companies with good, solid businesses and which are kicking off stable income streams superior to anything you'll find in the cash and government-bond market. They're the kinds of companies I have purposefully been loading into The Sovereign Individual portfolio all throughout what I've been referring to as the Year of Yield. Because even if investors don't realize it, I do understand that the real risk they face is to their lifestyle, not their portfolio. Good stocks bob up and down like a cork on the water … but they don't sink. If you avoid them today because you fear the stock market, then you're taking a much bigger risk than you know. Until next time, stay Sovereign… Jeff D. Opdyke P.S. Sometimes risk can be right out in the open, but no one is paying any attention. That's exactly what's happening right now with one of the biggest Ponzi schemes in history. No one is talking about how, when it finally unwinds, it could wipe out historic levels of wealth … and everyone in the U.S. is invested in it. I've been following this coming economic catastrophe, and to learn more about it – and how you can protect yourself from it – click here for my urgent report. Related Reading: A Risk-Free Way to Play the Euro… Without Buying It Gold: Something to Die For? One Chart Shows the Dollar's Sad Future The "Timing Indicator" You Need to Know RECENT ARTICLES 8/20/2012 Why Mid-West Drought Will Drive Up Gasoline Prices With a dismal corn crop, less ethanol will be added into gasoline, meaning more crude oil will be needed. So gas prices will skyrocket. 8/17/2012 Now is the Time to Buy Oil Stocks As demand for oil increases in many countries, oil prices will soar higher as marginal cost increases. Invest in companies like Dragon Oil. 8/16/2012 Value, Growth and Income in One Single Play China has a massive and growing consumer class. And for a safe way to play emerging markets, invest in companies like China Mobile. 8/15/2012 All the Value of Gold in the Palm of Your Hand Everyone should have at least 10% of their portfolio in physical gold. Protect yourself by investing in Maple Leaf Gold & U.S. Eagle coins. 8/14/2012 One Big Step Closer to the Fuel of the Future Natural gas, LNG and CNG, is the fuel of the future. So invest in companies like Fuel Systems Solutions, an alternative fuel supplier. STATE OF OUR WORLD National Debt Clock: $15,978,222,832,295 BECOME A MEMBER For more valuable information from The Sovereign Society on how to protect and grow your wealth, become a member today. JOIN NOW SPECIAL REPORTS Jeff Opdyke 2012: The Year of Yield Andy Hecht Metals More Precious and Profitable than Gold Bob Bauman How to Escape America, and Where to Go STAY INFORMED Whitelist Us Follow Us on Twitter Like Us on Facebook   Privacy Policy The Sovereign Investor 98 S.E. 6th Ave, Suite 2 Delray Beach, FL 33483 The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: http://sovereign-investor.com/contact-us/ Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. 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