INVESTMENT CHOICES

The November 9th issue of USA Today had an interesting article about investments. Our choice of investments can have a profound effect on whether or not there will be any money remaining in later retirement years.

First, you have to determine your level of risk. If you will only sleep well at night with your money in bank CDs, then you must be content with a 6% or 7% rate of return in today's market. With bank CDs, your deposits are guaranteed by the FDIC.

The next level of risk is mutual funds. Your deposit is not guaranteed, and you could potentially watch your assets go down. Within each mutual fund family is everything from very low risk to high risk. If someone is very conservative or elderly, I recommend a fund that buys U.S. government securities. They usually return about 5%, although at times in the past the return has been higher.

After that would be a fund that blends bonds and stocks, called a balanced fund. They usually have about 30% bonds, 60% stocks, and 10% cash. When stocks go down, bonds tend to go up, and the reverse is true as well. This provides at least some protection in a volatile market such as we have today. In fact, if you have limited investment funds, I consider the balanced fund to be the ideal investment. Historically, a balanced fund will return 8 to 10%

If you like to take risks and are young, then you can take your chances and invest in a mutual fund that invests in anything from overseas emerging markets to gold. The risks are high, and the potential for gain (and loss) is greater. It's not unusual to have a 50% gain or loss in one year.

The place to begin saving for retirement is in a Roth IRA. You can start one for as little as $50 monthly, and choose the mutual fund you want to use. There is a cap, however, on how much you can put into a Roth IRA. For tax year 2008, the maximum is $5,000 if you are under age 50, and $6,000 if you are over 50. Each spouse must have their own IRA. The money that accumulates will never be subject to income tax. It's the best thing since sliced bread!

I don't recommend buying individual stocks unless you are committed to following the advice of Warren Buffett--buy and hold forever. Otherwise, the risk of loss is too great.

I especially don't recommend getting into options, or paying money to go to a seminar to learn how to day trade. They are appealing to your greed, and they are the ones making money on you.

Once you have reached retirement, you can calculate how much you can safely withdraw by following the 4% rule. That is, never take out more than 4% of your total assets in any given year. That will safeguard your investments over your lifetime, and you will most likely be able to pass on money to your children.

Don't delay planning your future.

THE RIVER OF DOUBT

Several months ago I highlighted Endurance. It was an epic battle of man against nature. At the time, Brad suggested I read The River of Doubt, by Candice Millard. It is a riveting story centering around Theodore Roosevelt's journey down an unexplored river through the Amazon jungles of Brazil in 1914. The expedition was led by Candido Mariano da Salva Rondon, one of Brazil's greatest heroes.

You would think that battling the jungle would be stressful enough, but they also had to contend with a murderer in their midst. Roosevelt's description of the piranaha makes me shiver. He writes, "The head with it's short muzzle, staring malignant eyes, and gaping, cruelly armed jaws, is the embodiment of evil ferocity; and the actions of the fish exactly match its looks."

There is another description of a tiny, almost transparent catfish known as the candiru. They are only about an inch long, and survive solely on blood. They feed in the gill chambers of larger fish, and drop off after having eaten their fill. However, they can be lethal to humans in the wrong circumstances. Candice Millard describes the following:

"In this case, however, the victim reported that, just before the attack, he had been standing in a river urinating, but the water had reached only to his upper thighs, and his penis had not even touched the river, much less been submerged in it. The candiru, he claimed, had abruptly leapt out of the water, shimmied up his urine stream, and disappeared into his urethra. He had made a desperate lunge for the fish, but it was too fast and too slippery. The incident occurred in a small town more than a hundred miles from Manaos, and the local doctors had been at a loss to help the man. By the time he was finally moved to Manaos for treatment, he had been unable to urinate for more than a week, and his stomach has become so distended that he looked six months pregnant. The doctor who eventually operated on him was able to successfully remove the candiru--without resorting to amputation."

Roosevelt survived the journey, but just barely. Through the latter part of the journey bacterial infections and malaria made an almost lethal combination. He never completely regained his health, and died just four years later at the age of 60.

This book is primarily a tribute to Roosevelt. He was a man of courage and iron discipline. As a child he was plagued by asthma, but used harsh physical exercise to conquor his weaknesses. He followed this formula for the rest of his life, and after major setbacks or disappointments, would often retreat into great adventures and will himself to prevail.

Like Endurance, this is a study of leadership. Rondon lead this journey, and Roosevelt would defer to his decisions, but sometimes there would be heated exchanges. The two men had great respect for one another, and after returning to the states, Roosevelt called Rondon one of the four most accomplished explorers of his day.

I have purposely not commented on the good parts. Otherwise, why would you want to read it?

BUYING STUFF

J.R. introduced me to this video from SNL. Steve Martin is a great comedian. I've had a lot of fun sharing it with others, so check it out if you haven't seen Don't Buy Stuff you Can't Afford. I showed it to a class I teach at church on managing finances. I also played it for my LeTip group. They are all highly motivated, self-employed business people, so it struck a chord with them as well. I think there is a certain aspect of crowd behavior that happens in a group when this video is shown. If you really do have money issues you would be compelled to pretend you don't and laugh right along with everyone else. So if you comment, tell me if you are laughing because it's funny, or laughing because it hurts.

SPACE

Growing up in the country, I had the privilege of seeing the stars at night. In the Spring I would sometimes accompany my dad as he made sure all the sprinkers were functioning properly, thereby keeping the cranberries from freezing.


Those clear, cold nights allowed a good view of our milky way galaxy. In addition to individual stars, you can't take your eyes off the white splash all across the center of the sky--like milk.


On summer nights I used to lay on my back in the grass and think about distance.
Our galaxy is about 100,000 light years across, with about 100 billion stars,
and a black hole in the center with a mass of approximately 3 million solar masses. Within range of our radio telescopes we know there are about 100


billion galaxies. Who knows how many are beyond that?


If we traveled to the nearest star at the speed of light, it would take
4 years just to get there. I used to hope that someday I would be able to at
least visit other parts of our galaxy, but unfortunately God put the stars
too far apart for that to happen. Oh well. Not in this life.