And now for something completely different about rates of return and investments.
Big stock market drop, because the Chinese stock market has become too risky. Sounds strange, but it is true. The world is awash is money searching for a higher rate of returns. Keep in mind that rates of return and risk move in the same direction. The difference between a bond sold under Security and Exchange Commission oversight (conforms with Sarbanes-Oxley regulations) and one sold by the same debtor outside SEC regulation is 11 basis points or 11/100 ths of one percent, chicken feed.
Everyone is looking for a higher rate of return on their investment: boomers and pre-boomers alike. People are getting into riskier investments looking for that extra point; REITS, sub-prime mortgages, Vietnamese bonds. We need to think about the differential rate of return we can get and the differential risk we are taking. It just may be that the lowest risk is to invest some of your retirement money in a part-time, start-up business you can run yourself. Another approach could be a limited partnership with some other like minded boomers to buy a full time business you can all run together; an ice cream or coffee shop. Betting on yourself is generally better than putting that money on a casino in Bangkok.
What I’m talking about is putting together 2 things retired boomers what to do; keep busy and make 8% on their money. Look at an investment in your own business the way a bank would look at it. They ask what the rate of return is and what the chance of getting the lent money back is. You lend the money to the business and have the business pay you interest. Because you run the business you keep the risks under control.
Your little business can be about trading antique buttons on e-bay or running a Starbucks franchise. An investment in yourself is always the best investment you can make.
You can make one mistake with this strategy. If you become a passive investor you are headed for trouble. If you don’t want to be involved in the business on a weekly basis take your investment out. And as they say in all the investment brochures "Be sure to consult with you tax professional before deciding on any investment."
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POSTED IN: Being A Boomer, Finance, Mindset, New Ideas
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