Investing Outside of Wall Street – The big why and the goals

First, a disclaimer: I am neither a financial advisor nor an attorney. The blogs I will be posting are merely reflections of the experiences I gained as an investor since the year 2000. Before you take any investment actions based on information contained within this and/or any future blogs, please consult with a Certified Public Accountant; a fee-only, fiduciary-bound Certified Financial Advisor; and/or an attorney who is an expert on the specific investment instrument that you decide to pursue. You are responsible for your own financial destiny.

The big why

As of this inaugural blog on investing, I’m 63 years old. In 2004, at the age of 55, as I chose to leave the corporate environment to become a full-time investor, I established a set of 10-year strategic goals. They are listed in the next section, below. Originally, these goals were to be achieved by March 2014, which is less than two years from now. As of the end of 2009, half way through the allotted time period, I met my initial 5-year investment goals. I thought I was well on my way to achieving them on time. Today, it is looking less and less likely that it would happen. And I am not happy with my performance.

David, my husband of 40 years, says, “You’re like an Energizer bunny. Your every waking moment is laser-sharp focused on investing. And you never stop until you’re ready to drop. I don’t know how you keep up with such intensity your every waking moment.” He is right – I do have a tendency to block out everything else around me and keep working. After all, if I fail, I have no one else to blame but the one I see in the mirror – no matter what the economy is doing, who the current President of the United States is, who controls the Congress, or who hold the seats on the Supreme Court. While I am privileged to be able to vote for those who I believe will act in the best interest of this greatest country on Earth, I cannot directly control the actions of government officials – but I can control my own.

Recently, based on David’s repeated comments, I had a change of heart about how I spend my time. With all of the macro- and micro-economic turmoil of the last decade that we have endured together, I decided to be kinder to myself – and to David – by extending the deadline by a decade to March 2024, just before I reach my 75th birthday. There is a certain risk in allowing an additional ten years to achieve my strategic goals. Namely, aging and associated potential deterioration in my mental and physical abilities. I made up my mind to consciously slow down a bit, however, so that I can smell the roses of life with David – my one and only soul mate and best friend – before it’s too late. The only way I can do so is to get myself out of the home-office environment where my work never ends. And it just so happens that travelling is David’s passion – as much as investing is mine.

Now, to give you a little background – until I was age 50, money or investing was not a top priority in my life. It did not mean, however, that I ignored money. In fact, being able to pay my bills on time is important to me and I don’t like the idea of being in debt. As an MBA, I had a well-paying job at one of the Fortune 10 companies back then. A large portion of my paycheck – maximum allowed – was going into 401(k) savings accounts every month automatically. The month before our 50th birthdays, David and I achieved one of our major goals in life together, which was to pay off the mortgage loan on our house. That was the only debt we were carrying at the time. And, oh, what a relief it was to be debt-free! I was doing everything by the books – well, the old ones. I was convinced that I was all set for a very comfortable retirement. What I didn’t realize was that the rules of the game were changing rapidly in the financial market. I was caught completely off guard.

Ever since the year 2000, otherwise known as the period when the dot-com bubble burst, the topic of investing has become a major part of my continued journey to freedom and independence. During the early years of immersing myself into what was then unknown territories of investing, I could not help but make some observations as a novice investor. Invariably, I have made a lot of mistakes along the way – in a macro-economic environment that has never fully recovered since the market crash of 2000, followed by the terrorist attacks on 9/11/2001, followed by yet another major market crash in 2008. Coupled with a fire – caused by lightning – that destroyed our house in 2008, it has been a rough ride so far – to say the least.

I trust that each of the three branches of U.S. government – legislative, judicial, and executive – independently would behave to the best of its ability on any major issue of national consequence that requires its involvement. Our government is designed to have checks and balances, which result in many discussions and disagreements before a decision is made. In a democratic society, such as the United States, if the government officials don’t do what we want done, then we can only blame ourselves. After all, for the most part, we, the people, voted them in. If we don’t like their decisions and performance, it is within our power to vote them out of their office.

That being said, my nature is such that I cannot wait for the government to fix the problem for me. At stake are my retirement savings, which ensure my financial independence which, in turn, afford me the freedom to choose how I live my life. I have to do what I can for myself while I’m willing and able. This leads me to the next section.

The 10-year strategic goals, now extended to 2024

It took me four years between 2000 and 2004 to think through what my individual responsibilities had to be – to retain my freedom and independence – based on what had happened to my retirement savings.

When I set these three strategic goals in 2004, prior to leaving the comfortable corporate life, I had no clue where to start. I simply knew that I had to achieve them – so as not to become a financial burden to this country, which accepted this immigrant with open arms.  My goals are:

1. Not to be dependent on company-pension payments.

   • Why? Because companies are not obligated by law to fully fund the pension fund. I can only hope for the best but need to be prepared for the worst.
   • If you are interested, “Can You Afford to Retire?” (a PBS program) provides a good explanation of what you may need to be aware.

2. Not to be dependent on Social Security payments.

   • Why? Because Social Security is already under-funded.
   • You can verify this statement by clicking here >> “A Summary of the 2012 Annual Reports” by Social Security and Medicare Boards of Trustees.

3. Not to be dependent on company- or government-sponsored medical coverage.

   • Why? Because Medicare is already under-funded.
   • Again, you can verify this statement by clicking here >> “A Summary of the 2012 Annual Reports” by Social Security and Medicare Boards of Trustees.

As mentioned at the beginning of this blog, to my utter dismay, I am far from achieving these goals. In fact, if the fixed-income streams that I currently receive from pension and Social Security were to be cut off today, we would be unable to pay our monthly bills – most of which are being incurred due to investments. For instance, we have on-going attorney and CPA expenses but I would not think of making decisions without their input. Some tenants don’t pay their rent and water bills; worse yet, some of them trash the place before leaving, incurring huge repair costs, wiping out the already thin profit margin for the year and, often, several years.

There is a commonly-accepted notion that all “investors” are filthy-rich people. At least for this yet-to-be-self-sufficient investor, nothing could be further from the truth. I do what I do my every waking moment – except when I’m doing my yoga and strength training – because I value the concept of freedom and independence. I believe that those who are first-generation investors – meaning those who did not inherit their wealth but created it for themselves – are some of the most hard-working Americans you would ever meet.

With respect to the existing government programs, all of us who were employed paid into Social Security and Medicare throughout our working years. Therefore, we have every right to expect to receive these payments. By the same token, those who made the promises generations ago to “protect” the public did not anticipate the changes in the macro environment – such as longer life expectancies due to medical advancements.

Social Security and Medicare are the two largest federal programs, accounting for 36 percent of federal expenditures in fiscal year 2011. (Source: Social Security and Medicare Boards of Trustees)

As these examples of deficit-laden, tax-payer-sponsored entitlement programs – such as Social Security and Medicare – clearly indicate, decisions made by the government, with even the best of intentions in the beginning, have far-reaching negative consequences that none of us can predict. What is the lesson here? I hope we, as a nation, have learned a lesson that government-sponsored entitlement programs do not work. I think the government’s role – sponsored by us, tax payers – should be kept only to those essential aspects for a nation, such as defense and security.

With respect to retirement-savings programs, decisions made by a relatively small number of people on Wall Street, each of whom made more than enough to live off of for the rest of their lives, created dire consequences for millions of unsuspecting Americans and their retirement savings. And those of us who diligently saved for retirement – naively trusting that those who managed the 401(k) programs had fiduciary duties to protect our funds – are paying for the consequences of Wall Street insiders’ unethical behaviors. To say that I’m livid is an under-statement. As a result, I am steering clear of Wall Street with my current investments, all of which are now on Main Street, U.S.A., where I can keep tabs on every aspect of each of the investments.

Incidentally, if you are interested, four episodes of “Money, Power, and Wall Street” were put together by PBS to inform the public – in preparation for the 2012 election – about the economic issues facing all of us.

As you can see, I happened to have become passionate about investing. Not everyone has the time or interest. Yet, a majority of Americans are being impacted by what is happening in the economy, both here and abroad.  As a result, I’m afraid that the economic environment today is creating a fertile ground for greater social unrest.  I hope I’m wrong.  Desperate and scared people begin to cling to those who say what they want to hear, tuning out opposing views, and losing the ability to think for themselves.  History shows that, under a perfect storm, the masses can easily become susceptible to mind-control, enabling a dictator to step in and take charge.  I hope that the American system is sound enough to be able to reject any such possibility. I’ll keep doing whatever I can to prove that I can remain free and independent in this country of my childhood dreams.

Any thoughts or comments?  I’d like to hear from you.

Coming up next month

Beware of investment fraud.