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Guarding Your Wealth for Senior Citizens
It's Vital That Investors Stop and Look at the ‘Big
Picture’
The person who made the most off of the gold rush
was selling shovels
By Jeffrey D. Voudrie, CFP
 Most investors that I talk to know they want to
protect and grow their wealth. They are looking for an investment that
will help them do that. Should they buy an annuity or a mutual fund? But
they are missing the Big Picture and, in doing so, are putting their
financial future at peril.
Do you remember the 1970’s? The oil crisis, gas
lines, high unemployment? Inflation caused wealth to deteriorate. High
interest rates brought the economy to a crawl. Most people fought to
maintain the wealth they had worked years to accumulate only to see it
shrink. Some, though, understood the Big Picture and dramatically
increased their wealth.
I believe it is vital that investors stop and look
at the Big Picture today. Ignore it and you may see your wealth (and
your lifestyle) evaporate. See and understand it and you may prosper.
Looking at the Big Picture means taking a step back
and determining what you think will happen over the next 10-20 years.
What will the world be like? What changes do you think will happen? What
trends do you see developing?
What you see when you stand back may frighten you.
It shouldn’t. It’s about recognizing potential dangers so you can
protect yourself. And it’s about spotting opportunity so you can grow
your wealth. Your view of the big picture can then guide where and how
you invest.
For instance, let’s say I’m a farmer trying to
determine what I should plant. I see the big push for ethanol right now
and that it’s caused the price of corn to sky rocket. So should I plant
corn instead of soybeans?
That’s the decision most of us would probably make.
And that’s the point. The ability to spot opportunity not only involves
what we believe, but also what we think everyone else believes. Think
about it. If all the other farmers see the same thing I do, and I would
plant corn, then it’s very likely that most of them will, too.
If a lot of farmers stop planting soybeans and
plant corn instead, what’s going to happen? There will be more corn and
fewer soybeans. What if too much corn floods the market and corn prices
drop? What will happen to soybean prices if there is less supply?
Doing what everyone else does is only going to
result in the same returns as everyone else. If we can spot
opportunities that others are missing, we have the ability to have
greater returns. As a farmer, I can play the trend (plant corn), play
the counter trend (plant soybeans), or hedge my bets and plant both.
As an investor, we can further analyze this
situation to find ways we can profit from it. The amount of ethanol that
can be produced per bushel of corn depends on the starch content in each
kernel. If a way could be found to increase the starch content in corn,
that high-starch content corn will be more valuable than the rest.
We’ve all heard that the person who made the most
off of the gold rush was the person selling shovels. In the same way, it
may be the companies that produce the genetically modified seed that
prosper from the ethanol craze. Or the companies that produce the
fertilizers and insecticides that will be needed.
Monsanto (MON) is a company that specializes in
producing genetically modified seed. They are ‘selling shovels’. As a
result, their profits and the value of their stock have soared. A
$10,000 investment in Monsanto at the beginning of 2004 is worth over
$40,000 today. It’s up almost 30% in the first 6 months of this year.
If farmers are planting corn, there isn’t going to
be as much feed for livestock. That means that the price of meat, milk,
chicken and eggs and other groceries will rise, causing higher inflation
throughout the economy. If I don’t recognize that and take steps to
protect myself, I could see the purchasing power of my wealth shrink.
This is just an example. So, what do you think are
the major trends that might occur in the next 10-20 years? If you’re
right, what should you do to protect and grow your wealth? These are
issues I’ll be discussing in the next few articles.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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