[utahgirl]

Hi all!j
I am brand new to these forums and apologize up front if this subject has already been discussed.
My husband and I have about 50K in mutual funds and frankly I don't think we'll ever see them for our retirement years. I think we should liquidate and buy some property somewhere. What do you all think?
We are both turning 50 this year, owe 72K on our mortgage and about 10K for our two cars. Should we liquidate and pay off our cars and put the rest on our mortgage instead? Or maybe I'm jumping the gun and we should sit tight for now?
This is such a hard thing to reason out for me. Like my husband said, he doesn't want to be 75 years old and having to work to support us. Exactly what will happen if we spend our retirement now!
Please give me your opinions.

[seahorse]

Utahgirl,

I'm not a financial advisor, but since you asked, I will give you my perspective. Even before peak oil, I've always made very conservative financial decisions. Basically, stay out of debt. As a lawyer, I've seen debt crush people for any number of reasons (unexpected illness or injury). The value of having a home paid off can't be underestimated, especially if you are unable to work. It takes very little to live if you have no house payment. Being debt free gives you a lot of options. If you have two cars, get rid of one if that is at all possible, pay the other off.

However, if you don't go debt free, I personally feel like coal stocks are a good bet. There was a report last year to the Department of Energy commonly called the "Hirsh" report which talked about the importance of coal to the US (offset natural gas and oil declines). I also like rail stocks, bc coal is transported by rail, thus railroads are seeing a lot of profits now transporting coal and other goods that are cheaper to ship by rail than trucks. I also believe that gold and silver, actual bullion coins like American Gold or Silver eagles are good choices.

Hope this helps some.

[pup55]

Do not take this advice unless you check it out first. As I always say: never take investment advice from anyone who has a job. Also note: I am singling out Vanguard but most other big mutual fund companies have similar funds you can get into, but Vanguard is good becasue the minimum on some of these funds is within the reach of the joe schmoe investor with $50K. Also, if you do the MSN Money Mutual Fund wizard, you will see that their expense ratios are low, and there is no front-end load, both of which will help your rate of return.


a. Get rid of your cars and get some cheaper ones that run that you do not owe money on. If you owe $10K on these cars, chances are your payments are approaching $600 per month, which is a wealth drainer no matter how you look at it. Also, you no doubt are paying a lot of insurance out every month. If you are "upside down" on these things, the best thing to do is probably pay them off, and start banking the $600 per month. Also, you can reduce your insurance to liability-only, which will add maybe $100 per month. Ideally, what you want is two paid-off cars that no one would want to steal, and that are cheap to run etc.

b. Take the rest of the money and put it roughly evenly in the following "peril resistant" portfolio:

VGHCX Health care investors (in case the Bird Flu hit) 6.21% increase in the last 3 months, 19% in the last year.

VGENX Vanguard Energy Investors (in case PO or another Hurricane hits) 11.41% for the last 3 months, 40% for the last year.

VGPMX Vanguard Precious Metals and Mining (economic toileting) 21.47% last three months, 67% past 12 months.

For an added kicker, think about Vanguard international Growth (to avoid US dollar issues) but the precious metal fund should hold you ok.


Note: most of the other big fund companies have similar funds, so do research on the fund group you are already in, if any, keeping in mind that you want no upfront load, and really low expense ratios, and ability to cash out and head for the hills at any moment if you want.

c. If you take $50K and do this, with an average return of 42%, and if (big if) the performance is as good in the next 12 months as it was in the last 12 months, you will make $21000, which along with the $700 per month you are saving by not making the car payments and having cheaper insurance, will give you a total of about $80K in savings in one year, and $115K in two years, if you let it ride another year, and stick your $700 per month in the fund too. Unfortunately, the Feds and the state of Utah will want their share of taxes when you cash out, so you will have to grumble a little when you do it.

But in two years, you will be able to pay off the house or sell the house and head for the hills. I guess maybe the house is worth $150: so this will give you pretty close to $250K in three years, if things are in such a state that you can cash it out then at the same amount it is worth today.

d. While you are at it, think about reducing some of your other expenses. Cut down from two brain-tumor-causing cellphones to one for emergencies, look for a broadband/telephone package that will be cheaper. We all know that Utah is the lowest per-capita smoking state, so you probably do not smoke, but if so, quit before it kills you. If you are strung out on medications prescribed to you by the pharma-medico establishment that appear to be doing nothing, wean off of them and make lifestyle changes (lose weight) that will solve most of the problems that you are taking the drugs for. Example: zocor (cholesterol drug) is about $1.50 per 40 mg dose. Your cholesterol problem will probably go away if you get down to the weight you were in high school. (note: I am not a doctor. Check with one before you do this).

Anyway, you do not know how lucky you are. You have a little seed money, and except for the cars, appear to be in a pretty good situation. The only thing you need to have is one of the three catastrophes happen, you cash in on your mutual fund, and you are off and running.

[clover]

$this->bbcode_second_pass_quote('seahorse', '
')The value of having a home paid off can't be underestimated, especially if you are unable to work. It takes very little to live if you have no house payment. Being debt free gives you a lot of options. If you have two cars, get rid of one if that is at all possible, pay the other off.

[o2ny]

$this->bbcode_second_pass_quote('pup55', 'V')GPMX Vanguard Precious Metals and Mining (economic toileting) 21.47% last three months, 67% past 12 months.

[ModernAngel]

$this->bbcode_second_pass_quote('o2ny', '
')Just fyi, VGPMX is now closed to new investors.

[InverseBetaDecay]

pup55 is right about Vanguard mutual funds, very low expense ratios. I have held the healthcare oriented VGHCX for years, and the returns have been excellent. One consideration, however, is that Vanguard requires you to buy & hold. That is how they keep expenses low, but expect to be penalized for holding less than 5 years. There are some ETFs now which offer a similar investment mix with more liquidity. Five years seems long in these uncertain times. Another issue is quite often the best mutual funds have huge (to me) minimum purchase requirements. I believe VGHCX is up to $25,000, with an even sweeter deal @ $250,000. Often you can buy less if it is for an IRA.
Although I am an engineer now, my undergrad degree was Finance, not that I am claiming to be any kind of expert. ETFs might be the way to go for your $50K.
If you are a bit of a "doomer" these ETFs make sense: PHO (water) USO (new crude oil ETF), XLE (energy), XLB (materials) and , of course GLD (gold)
CEF (Central Fund of Canada) is a good gold mutual fund, but be aware of the tax implications (PFIC, yikes!)
One warning, the above have had a good run, be careful about chasing gains
I'll close some recommendations for irresponsible speculation: (my favorite type of investing, but don't bet the ranch!) EGO is a volatile gold mining company, lots of fun; PAL & CHDSF (paladium) won't be boring to own .
As always, do research, and watch out for free advice you get on the internet (including the above)

[pup55]

$this->bbcode_second_pass_quote('', 'J')ust fyi, VGPMX is now closed to new investors.

[Aimrehtopyh]

Does anybody know anything about these guys?

http://www.gafunds.com/lp6.asp?GOoilpeak

I think their projection of when peak will be is optimistic, but that's easily adjusted.

[pup55]

Their expense ratio (1.68) is twice as high as Vanguard, and also, there is a 1% redemption fee, so you are starting maybe 2% in the hole already.

If I read the prospectus right, the fund is only $12.5 million, which is not big enough to throw any weight around in the boardrooms of the companies they hold (unlike the huge funds). The turnover rate is 20%.

Also if I read the annual report right, they are still 95% invested in oil and gas, and oil service-type companies, and despite being peak-aware, are not diversified into any renewables.

Annual Report

The fund manager is Tim Guinness, who is interviewed in the following article

Business Week

Maybe he is a viewer of this forum, occasionally, so we had better be nice.

So the bottom line is, most of this is just invested in oil and gas, and most of the difference between this and one of the more boring but bigger and more diversified funds is that he flips his portfolio more frequently, and so maybe he will get lucky and beat one of the big funds and maybe he won't. If this is worth an extra 2% costs and fees to get this difference is really questinable.

Tim, if you are reading this, please feel free to disagree and justify your fee structure.

[chuck6877]

Tocqueville Gold fund (TGLDX) has been great for me.
Performance: YTD: 25.71% 3 year: 40.32% 5 year: 40.48%

Aimrehtopyh mentioned GUINNESS ATKINSON. They are a great fund company that talks about their knowledge of peak oil. They have the Guinness Atkinson Global Energy fund (GAGEX) that has been rocking even with their high fees .

Plus Ginness Atkinson opened on April 1st an ALTERNATIVE ENERGY FUND!(GAAEX) Finally!! Here is a link:
http://www.gafunds.com/gaaex.asp

[MrBill]

$this->bbcode_second_pass_quote('pup55', '')$this->bbcode_second_pass_quote('', 'J')ust fyi, VGPMX is now closed to new investors.

[Cynus]

Actually, the Guinness Atkinson Alternative Energy Fund (GAAEX) is not invested in oil and gas companies. Their report for the fund ( http://www.gafunds.com/gaaex.asp ) blew my mind, talking about Hubbert, Burgan, Cantarell, Colin Campbell, etc. I'm not sure what the fund contains though. They're up 4% in less than half a month though.

[chuck6877]

Cynus,

Read the Name of the fund again

Guinness Atkinson Alternative Energy Fund (GAAEX)

ALTERNATIVE ENERGY. So it's in windmills, solar, ethanol, etc.

There is also the Guinness Atkinson Global energy fund (GAGEX) which is in Oil and Gas. It returned 64% last year!!

Guinness Atkinson like you said knows a lot about Peak Oil and they're investing to take advantage of it.

Take care,
Chuck