Wisdom of Rich Dad

If you’re tempted to sit out this wild ride in the stock market, you’re not alone. A recent MFS Investment Management survey showed investors allocated 26 percent of their portfolio to cash, on average—not through money market funds or certificates of deposit, but savings accounts.

“Across the age cohort, people have decided that they want to have greater access to their money, and it’s got to be ATM access,” says William Finnegan, senior managing director of U.S. retail marketing for Boston-based MFS. “They want it in the bank.”

The survey also found that Generation Y investors (those 18 to 30 years old) allocate even more to cash—30 percent, on average.
“I think it’s probably driven by fear, and it’s driven by prior experience,” Finnegan says. “When you look at the past decade [when] a lot of these folks came of age in investing—bubbles and bursts, that was their experience.” Finnegan blames what many refer to as the “lost decade” for stocks—2000 through 2009—during which the Standard & Poor’s 500 index finished in the red.

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Gold has climbed by a phenomenal $339 an ounce since the start of July, proving its worth as a safe-haven investment, but the yellow metal isn’t the only commodity that can offer a refuge for investors.

“After all, no matter what happens to paper markets, physical commodities will still be in demand,” said Jason Schenker, president and chief economist at Prestige Economics LLC.

Gold prices are up 28% year to date. Other commodities have seen impressive gains as well, despite the bloodbath in the U.S. equities markets and often grim news on the global economy.

Year to date, silver’s up 31%, corn has added 13%, coffee’s up 10%. Heating oil’s added 13% and gasoline’s up 18%.

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Andrew Carnegie once said “Ninety percent of all millionaires become so through owning real estate.”

I am not sure how accurate that statistic is, but there does appear to be some truth in that statement and it does capture my attention, as I am sure it has many others looking to enter the real estate game as a means of wealth creation.

Perhaps you’re considering buying your first rental property as an investment. You’ve read books by Donald Trump and Robert Kiyosaki, attended a few seminars, and are now ready to take the plunge. Or perhaps you’re the seasoned investor looking to diversify your portfolio or leverage the equity on an existing home. Either way here are a few things to consider.

Eligible properties:

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Russ Whitney is one of the big names in the real estate business nowadays. Being the chairman and CEO of Whitney Information Network, Inc., and Whitney Educational Group, Inc., and being the founder of The Whitney Foundation, Inc.—Russ Whitney really is something!

Russ’ story is one amazing success story—from working in a slaughter house, earning $5 an hour; he successfully became one of America’s youngest millionaires. By the age of twenty seven, he already owned millions worth of properties. But how did Russ Whitney become one of the youngest American millionaires? Here’s his story.

Russ Whitney was born on November 18, 1955, in a small town in Long Island. He was raised by his dad and aunt. They moved to Queens, New York when Russ was still very young and he grew up there. Russ dropped out of high school. He got married and to earn a living, he worked at a slaughterhouse. But Russ wanted more from the life he was living. He strived to learn more ways to earn money.

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With every financial decision, you have to balance two competing urges: the desire to not be poor and the desire to be rich. Lately the former has been trouncing the latter.

“Investors are stuck on protection of principal when they should be focused on what their principal can do for them,” says Colleen O’Brien, a vice president at Charles Schwab. Your principal will be supporting your golf games and travels after you retire, so head to a savings calculator like the one at cnnmoney.com/tools and run the numbers using a cash return of 3%.

That’s not the comfortable retirement you were hoping for, right? Now do it again assuming a stock and bond portfolio earning 7%. “When you force yourself to focus on what you want your retirement to look like,” says O’Brien, “that helps you get moving toward that goal.”

The EBRI Retirement Confidence Survey found that workers who have done some kind of retirement calculation have higher — and more realistic — savings goals than those who have never run the numbers. Plus, 67% of the doers are confident about retirement, vs. 49% of all workers.

But don’t be a hero. Do you know what will really turn you off stocks for good? Jumping in with both feet today, just as the market is nearing its pre-crash highs, and then taking another beating on the next dip.

If you’re in your thirties or forties and afraid of the market, aim to reach, say, 30% in stocks over the next two years. That’s still too conservative for someone your age, but it’s a start.

Divide to conquer your fears. Splitting your money into long-term and short-term buckets — the same trick that can stop you from jumping in and out of stocks — can also help you overcome your fear of stocks in the first place. Again, your long-term bucket doesn’t have to be filled to the brim with stocks.

Investors in corporate bonds haven’t gotten much for their money lately, but new signals suggest that’s all about to change.

After a nearly 12-months tear, companies have been issuing fewer bonds — a sign bond investors are tired of settling for low yields and weak investor protections, say market watchers. In June, issuance of new high yield bonds dropped 68% globally and 66% in the U.S. — a turnaround from May, when global issuance hit an all-time monthly record of $50 billion, according to Thomson Reuters.

Investment-grade bond issuance was down, too — 46% globally and 65% domestically. Ultimately, this could show investors are demanding better deals before snapping up new issues again, says George Young, portfolio manager of the $85 million Villere Balanced fund (VILLX). “You have sort of a standoff right now where investors say that’s not enough of an incentive for me to lend you money.”

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