#eifrig

[appetizerrecipes]

morgiger Tag nachdem internin einer Woche gebacken und eifrig, dies zu beheben … morgiger Tag nachdem internIch werde in einer Woche fertig sein und eifrig versuchen, dies zu beheben

[retirementmillionaire]

A Dead-Simple Method to Manage Your Risk

It’s a simple question… and it has a simple answer…

What sort of return do you need from your portfolio to earn to pay your bills or enjoy your retirement? $2,000 per month? $4,000? $8,000?

That’s the focus of nearly every investor. No matter whether you’re interested in spending wealth in your retirement, or building wealth for future use… Investors focus on returns above all else.

Most people think that to generate eye-popping returns, you have to pump lots of money into small, “risky” stocks. Isn’t that what we’re always taught… that risk equals reward? The more risk you take, the greater your potential returns?

It’s true that owning volatile stocks can result in big gains (as well as big losses, if you’re not careful).

The problem is, most individual investors don’t understand risk at all…

This year, we’ve seen volatility spiking in stocks. Many folks equate volatility with risk. But the secret to generating big returns lies in managing risk and harnessing volatility.

So today, I want to talk about some ways to clarify your understanding of risk today.

Rather than develop a complex, but flawed, analysis of risk… it’s more helpful for an investor to think of “risk” in a simpler form: How much could I possibly lose?

So first… what is risk? It’s impossible for most people to quantify all the potential challenges that could cause a stock to fall – new competition, regulatory changes, and macroeconomic trends, to name a few.

It’s more useful to simply think of risk as the money you could lose on any one investment.

If you normally invest $10,000 on a position with a 25% stop loss, then your usual level of risk is $2,500 per position.

Longtime readers know I typically recommend using a 25% stop for an exit strategy. (Recall that a stop loss is a set price or percentage you use to know exactly when to sell an investment.)

But readers often wonder if there are times when you should use a different size stop loss.

Let’s say you’re interested in a stock that has the potential to make a big move in a short period of time. We want to buy that stock to capture the next big swing upward… That’s what we’d call “harnessing the volatility.”

Holding that stock with your typical 25% stop could force you out of the position before you capture those gains… Remember, because that stock is volatile the shares move around a lot. So instead, you want to hold it with a 50% stop.

But look at what that does to your risk…

With that $10,000 position, you’re now risking $5,000. You’ve doubled your risk.

But there’s a simple way to reduce that extra risk…

If you want to keep your risk level to $2,500, you would reduce your initial investment to $5,000. You could also go even smaller to have less risk in this kind of high-variance position.

We tend to recommend a wide 25%-35% stop for more volatile positions, like oil and gas stocks. This will allow for the cyclical swings in share price that the commodity industry is known for without kicking you out too early.

Similarly, we tend to recommend a narrow 15%-25% stop for less volatile positions, like well-established companies that dominate their industries. Companies like Johnson & Johnson (JNJ) and McDonald’s (MCD) are so large and liquid that their share prices don’t tend to move much.

As an investor, having an exit strategy is vital to your success.

If you stick to your exit strategy, it can serve as a near-foolproof way to methodically cut your losses and let your winners ride.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team April 11, 2018

PS Don’t miss Doc’s daily insights with a free subscription to The Health & Wealth Bulletin. Click here to get started today.

[retirementmillionaire]

Three Mistakes That Drain Your Wallet

How hard is your money working for you?

When you sit down and evaluate your finances, keep this one thing in mind…

It’s what I think about when I’m researching how to help my readers make and save money, so they can live a richer retirement.

Is your money working as hard as it can for you? And do you have any holes in your financial boat that could easily patch up?

As a Health & Wealth Bulletin reader, you’re already ahead of most average folks. But even money-savvy people fall for these small mistakes that could have huge impacts on their wallets.

Today, I’m sharing three common mistakes people make that drain their money needlessly, and how to correct them. The next time you’re checking out your spending, look to see if you’re making any of these mistakes.

If you avoid them, I can almost guarantee you’ll be on track to save yourself thousands of dollars in the next decade…

No. 1: Never Use Cash When You Can Pay With a Rewards Card

Rewards cards are what they sound like… A merchant or card issuer will give you incentives to use its card. Depending on the cards, the rewards can be things like cash back, airline miles, or points to exchange for gift cards. As long as you pay your credit card off every month, you can treat these rewards like free money.

I use several rewards cards… For example, I like to use a card branded by one of my preferred airlines to rack up flier miles. My assistant Laura uses a cash-rewards credit card. This card lets her trade in rewards for gift cards and other items.

I like to keep cash on me for emergency purposes. But otherwise, I almost always use a rewards card.

To find the best credit card for your situation, use the websitewww.nerdwallet.com to help find the card that makes the most financial sense for you and offers the kinds of rewards you’re most likely to use.

When you visit the site, it will ask you three questions: “What kind of card are you looking for?” “How do you plan to use your card?” and “What are you most interested in?” (It will offer multiple-choice responses.) Then, the site will offer up a list of cards that may fit your criteria. On the list, you’ll see the expected net annual rewards you’d receive, the reward rate, the annual fee, and the current signing promo. You can also read testimonials from people who use each card.

Several years back, I took a two-month road trip around the U.S., but got a card that gave me 3% and several cents a gallon off on my gasoline purchases. That card alone saved me several hundreds of dollars that summer.

No. 2: Never Pay DRIP Fees

Reinvesting dividends is one of the simplest ways to grow your wealth… That’s why I often recommend the stocks of shareholder-friendly companies like McDonald’s (MCD) that regularly pay dividends.

Before the advent of online brokerages, the best way to reinvest your dividends was directly through the company, using what’s called a Dividend Reinvestment Plan (DRIP). So if you owned MCD shares and wanted your dividend reinvested – instead of receiving a check in the mail – you’d join the McDonald’s DRIP. Of course, McDonald’s would charge a fee for this, as much as $20. This was a good deal then… but not anymore.

Now, you have a much simpler way to reinvest… use your online broker. Once you own shares of a stock, request your broker to reinvest your dividends. The best part is that most brokers do it for free.

No. 3: Never Ignore New Banking Fees

Make sure claims of “free banking” are really free. Truly low-fee or free banking is getting harder to find. A recent comparison done by Bankrate, the online aggregator of banking industry news and information, shows 38% of banks offer fee-free, non-interest-bearing checking accounts. That’s down from close to 75% in 2005.

Some typical fees include monthly service fees for low balance accounts, overdraft fees, ATM fees, and transaction fees. Bank of America even tried to impose a $5 fee to customers for using debit cards. The plan was dropped after huge customer backlash.

Some banks still offer free checking accounts with little to no minimum balance or use requirements, including EverBank, Capital One, and USAA.

Keep in mind, some of these banks mostly operate online. If you’re comfortable doing all of your banking online, these banks are a great alternative to traditional brick-and-mortar banks. Online banks have fewer expenses, and many offer better rates than you’ll find at a local bank.

Bottom line, use these tips and keep more money for your retirement.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team April 4, 2018

PS Don’t miss all of Doc’s great finance tips with a free subscription to our e-letter, Health & Wealth Bulletin. Click here to get started.

[retirementmillionaire]

If You Don’t Own This Sector, Your Portfolio May Be Riskier Than You Think

Your portfolio isn’t as safe as you think it is…

Earlier this month we talked about “sector diversification.” Every portfolio should have holdings spread across a few sectors. It’s a simple way to protect against any one sector’s downturn.

To dive a little deeper, when you diversify across sectors you also need to consider something called correlation.

Correlation is a statistic that measures the degree in which two stocks, or sectors, move in relation to one another. Any correlation must fall between -1 and 1.

A correlation of 1 means that when one asset moves, the other asset moves in the same direction, in tandem. A simple example of positive correlation in economics is airline tickets and the price of fuel. As the price of fuel increases, the price of airline tickets also increases.

A correlation of -1 means that two assets move in opposite directions of one another. An example of negative correlation is stocks and gold. Generally, as stocks fall, folks become worried and tend to buy more gold.

And a value of 0 means there is no correlation at all.

So, why is correlation important to your portfolio?

Even if you’re diversified across multiple sectors, if the sectors have a high positive correlation, your portfolio will still be vulnerable to concentration risk. Concentration risk is when you sink too many assets in one boat… Think of it as buying all tech stocks or all shares of one company.

If your portfolio has a high negative correlation, you’re limiting your upside potential. As one asset goes up, the other will go down, thus negating your gains.

Most stocks have a correlation between 0 and 1.

Over the past three years, the highest correlated sectors were technology and consumer discretionary. Companies in the technology sector include Apple (AAPL), Microsoft (MSFT), and Cisco (CSCO). Consumer discretionary stocks include Starbucks (SBUX), Carnival (CCL), and Comcast (CMCSA). The correlation between the two sectors is 0.85.

These are highly correlated because as consumers, we spend a lot of our extra money on tech gadgets. We need to have the latest and most advanced tech products. New smart TVs can cost a few thousand bucks… while the latest Apple iPhone starts at $1,000. And many consumers are willing to pony up the money (the first batch of iPhone X shipments sold out in about 15 minutes).

Folks who own stocks in these two sectors may think they are well diversified… But any negative swing in the technology sector probably means a similar decrease in the consumer-discretionary sector as well.

There is, however, one sector that is less interconnected than the others… the utilities sector.

Traditional utilities have long been a cornerstone of retirement investing. And for good reason…

The highest correlation the utilities sector has is 0.57 with consumer staples. All of the other sectors’ correlations with utilities are less than 0.3.

It’s by far the least correlated sector.

Most important, the utilities sector has the lowest correlation to the broad market, as measured by the benchmark S&P 500 Index, with a value of 0.3. The rest of the sectors have a correlation of 0.65 or greater with the broad market.

That means no matter what the market does, utility stocks, for the most part, behave independently. That’s why buying utility stocks is a great way to balance a portfolio and reduce risk.

It can also make you money. Here’s how the utilities sector stacks up against the market…

Even with a small correlation with the S&P 500, utility stocks still managed to follow and even outperform the market.

In fact, in my options-trading service, Retirement Trader, we’ve made four trades on the utilities sector since 2015. It’s been very profitable for us. We closed all four trades for gains with an average annualized return of over 14%.

What’s great about the utilities sector is that it’s viewed as relatively recession proof…

Let’s remember what kind of companies are in this sector… electric, gas, water, and other infrastructure firms. Their revenues aren’t significantly affected if there is an economic downturn because their products are essential to everyday life. Also, the stocks typically pay high dividends – which is attractive in any market condition.

But I’ve never heard anyone at a cocktail party get excited about an electric company.

As I’ve written before, cocktail-party gossip about stock tips is a sure sign of the top. It happened with real estate and it happened with tech. My father used to buy stocks only based on this kind of gossip.

But no one ever mentions utilities stocks. They’re considered too “boring” for these tip-seekers.

And yet these boring stocks can help save your portfolio from a market downturn.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Retirement Millionaire Daily Research Team Baltimore, Maryland November 1, 2017

P.S. Never miss any of Doc Eifrig’s advice on how to improve your wealth and health. Sign up for his free e-letter, Retirement Millionaire Daily, right here. 

[retirementmillionaire]

Did You Get Your Free $79?

I tried to help you make a free $79 last month…

I opened the books on my Retirement Trader service… offered a “crash course” in options trading… and then published a free trade that anyone could make – no matter how hesitant you were about options.

This one trade wasn’t going to make you rich. But that wasn’t the point…

The point was to encourage you to roll up your sleeves and make a trade that could open up a whole new world of “trading for income” in retirement… for the low, low price of free.

Here’s what happened…

The covered-call trade we made was in semiconductor giant Intel (INTC).

Anyone with $3,600 to invest could have made this trade (options contracts trade in blocks of 100 shares). And anyone who did make this trade is solidly in the green. We closed it out in my Retirement Trader service three weeks later for a 2.2% profit.

That might not sound like a lot at first glance… But on an annualized basis – what you’d receive if you could put this trade on again and again – it’s a 33.6% gain.

That’s my No. 1 goal in Retirement Trader.

To put on trade after trade… and rack up win after win… to help you boost your income in retirement. We’ve collected this safe and steady income for seven years now. And we’ve closed winning positions more than 94% of the time.

This is the single most powerful investing strategy that I can teach you.

Now, I know that options trading can seem overwhelming if you’ve never done it.

It doesn’t help that so-called “options pros” like to throw around terms like delta, gamma, and so on. And believe me, you don’t have to understand them to trade options the way that we do.

In fact, you can make big gains for years by mastering just one simple strategy.

I know because that’s exactly what I’ve done.

When I started with options 30 years ago, I mastered just one type of trade. And I’ve used it over and over again, for years and years to generate income and to stuff my portfolio with shares of great stocks for less than what everybody else was paying.

Amazingly, the income from the strategy has covered many of my living expenses. And even provided play money at times when I wasn’t working… like during medical school.

It’s allowed me freedom and peace of mind to focus on my true passions in life.

Here’s the strategy: since my earliest days in Wall Street, I’ve been selling covered calls for income on my favorite stocks – like this free Intel trade from last month.

With our strategy, we profit in a bull market… Stocks go up, and our covered-call trades get exercised and we sell our shares for maximum projected returns.

That’s what happened if you “tested the waters” with this Intel trade…

If you put on this trade, you’ve made at least $79 (using the minimum position size) if you closed it out early. (We did so in my Retirement Trader service because we could take most of our gains off the table early. You can see that by looking at our annualized gain figure of 33.6%.)

And if you’re still holding this covered-call trade, you’ll make $126 as long as Intel shares stay above $37 on November 17. (That’d be good for an annualized gain of 21%.)

But this is just one way that we profit…

We also profit when stocks remain flat or even fall a bit.

I’m sure you’re well aware that this is one of the longest bull markets in history. I know that many folks are getting more and more nervous.

I can’t predict when the next bear market will hit. Nobody can.

That’s why I position my portfolio to be ready for anything. And by collecting cash up front – like we do when we trade for income in Retirement Trader – you can reduce your risk compared with simply buying stocks outright. And your gains can be exceptional.

Earlier this month, subscriber Elaine M. wrote in to our Retirement Millionaire Daily feedback line…

My first newsletter, and my first experience with options, was Doc’s Retirement Trader. I started with $50,000 about three years ago. My account today is worth $250,000. I made a lot of mistakes in the beginning by following Doc’s options trade, but made zealous decisions to make even more money by writing contracts for higher premiums – thus buying myself more risk. But because it was Doc and his incredible research, even the assignments were good bets – even at the price I paid – because he has always made recommendations on really solid companies.

Eventually I learned to follow Doc’s advice more closely. I have learned so much. Last month my YTD return was 48%. This month (mostly because of Apple lagging a bit) my YTD was 40%.

This is the kind of e-mail that keeps me writing my newsletters.

Elaine, I’m glad that you’ve been making a lot of money with our strategy. Thanks for stepping out of your comfort zone and taking control of your wealth and retirement. I can’t tell you how much it means to us that our efforts here are rewarding you.

For the rest of you… here’s my offer:

I’d like you to join Elaine and my team with Retirement Trader and start getting paid more income each month in retirement.

I don’t have any sort of fancy video or presentation for you to watch. This is a take-it-or-leave it kind of deal. The link above goes to an order page. It’s as dead-simple as you can get.

That’s how confident I am in this strategy.

When you give it a try, I know you’ll earn more income every month for your retirement – that’s how options work.

That doesn’t mean we won’t ever have a trade that goes down. We will. But we’re also capable of trading our way back into a winning position. Our current streak is 106 winning trades.

Hitting 100 trades in a row is a significant milestone in the trading world…

And it’s not the first time for us. Subscribers may remember that we did this once before.

Our previous streak started in 2010 and ended in October 2013. We made it all the way to 136 consecutive winning trades before we booked our first loss.

After that, most of us felt a similar streak couldn’t happen again… that it was impossible…

Well, it is happening again. We’ve broken 100, and we’re ready to compete with our previous total of 136.

It’s not as simple as selecting the right stocks. Trades don’t always go in our favor. Sometimes, we have to make multiple adjustments to earn our profits. It requires discipline and patience. But it’s better than losing money.

We’ve been so successful over the years because of that discipline. It’s also because we sell options on high-quality stocks that we’d love to own.

So, again… here’s my offer: I’d like for you to start making more money in retirement, starting this Friday when our next Retirement Trader issue comes out.

Click here to join my subscribers. Again, this link does not go to a long video.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig Baltimore, Maryland October 30, 2017

[retirementmillionaire]

The No. 1 Question Most Investors Forget to Ask

When my friend Seth asked me to invest in his new wine store, the decision was easy…

He’d already answered the most important question you must ask before making an investment…

I got to know Seth while I was in medical school at the University of North Carolina at Chapel Hill and he was the wine buyer for a local grocery store… He was educated as a chef and was working on his Master Sommelier badge. (A “sommelier” or “wine steward” is the wine expert at high-end restaurants. You must pass an exam to throw around the snooty French title, and “master” is the highest level of certification.)

Seth always gave great suggestions for meal and wine pairings and would remember them months later… As a customer, I could tell he cared about me, listened, and gave great advice (a spectacular combination). So when he approached me about backing his shop… I knew he understood wine and had a passion for it.

But what really sold me was the due diligence he had performed on the wine market in the Raleigh-Durham-Chapel Hill area. (The “Triangle,” as we Tar Heels call it.)

He talked to local restaurants. He visited other wine shops. He took notes. He even studied traffic patterns on the streets near where his shop would be. His business plan was detailed, thoughtful, and laid out different scenarios. He thought about the marketing and the customer experience in great detail…

And it was clear from the dividend that he proved he could pay me – along with the discount on wine I’d receive as a part owner – and that I would easily get my capital back out of the shop in a short amount of time.

That’s the core question you must ask any time you think about investing your money. Whether you’re loaning money to friends or family, acquiring land, purchasing gold coins, or buying a stock… You have to go in knowing how you will get your money back and how likely you are to recover it.

Backing Seth was easy… Eight years later, the dividends I’m getting from a simple wine shop in North Carolina are providing me with a nearly 15% annual return (and lots of great wine at wholesale prices). By year 10, I can imagine doubling my initial stake every year.

The two-part question I’ve described is what’s known in financial circles as an “exit strategy.” This probably isn’t how most folks think about an exit strategy… I’m not talking about protecting yourself from the worst-case scenario.

When I talk about exit strategy, I mean knowing how… and how likely… I am to get my money back.

Most people never consider how they’ll get their money back. People speculating on the next hot stock tip, gamblers in Vegas, and even a lot of option buyers are usually hoping and praying to get a large chunk of money back at the end. But they can’t really say how that will happen… And they certainly have no grasp of how likely (or unlikely) that is. But it makes a big difference in the success of your investments.

When you invest your money, you can get it back in one of two ways…

You either get it back in a stream of income – interest or dividend payments.

Or you get it back when your principal is returned to you – when a bond matures, or when you sell your asset (the stock, gold coin, or beachfront condo). If you sell it for more than you paid, you’ve got a “capital gain.”

When I recommend ideas in my monthly Retirement Millionaire newsletter, I focus on both pieces of the puzzle… income and capital gains. Most of the time, I want to ensure stable income that will return capital while we wait for the potential growth that will result in capital gains.

If you’re looking for recommendations that can return both income and capital gains, my Retirement Millionaire subscribers can view our entire model portfolio here, along with specific buy-and-hold advice (look for the recommendations that say “Strong Buy”).

And one of my favorite ways of making sure I always have an exit strategy with every single recommendation is by using a trailing stop. There is no better way of tracking your trailing stops… and potentially significantly improving your returns… than with our affiliate company, TradeStops.

Tonight, Porter Stansberry, Steve Sjuggerud, and TradeStops founder Richard Smith are hosting a free event called “The Day the Bull Market Will End,” where they will show viewers EXACTLY when to sell your positions… how to use Richard’s software to drastically improve your returns… what to do with your money right now… and much, much more. Click here to make sure you don’t miss tonight’s event.

[retirementmillionaire]

Get Skeptical and Protect Your Retirement With ‘SWAN’ Income

The bears are getting harder and harder to find…

For the past seven years, we’ve been arguing that the economy has been slowly grinding higher… And we’ve been riding the bull market that grew out of it.

It’s gone well…

But while we’ve enjoyed these steady gains, lots of investors simply left the market after the financial crisis. Many never came back.

A recent study from BlackRock shows that Baby Boomers hold 60% of their assets in cash and only 20% in stocks.

This is a massive mistake…

You’ll face a long road to retirement if you’re earning 0.1% in a bank account. After inflation, all that cash is worth even less today than it was in 2010.

On the other hand, those who simply bought an S&P 500 index fund have more than doubled their money.

And one key factor told us the market would keep rising – the lack of extreme optimism and speculation about the future of the market.

Even when stocks rose 50%… 100%… or 200% from their 2009 lows, we saw lots of pessimism and negativity in the markets. Investors were piling into super-safe bonds and driving interest rates to new lows. Financial-news network CNBC had one hedge-fund manager after another on camera nearly every day calling for a “crash.”

But markets don’t get too hot until the crowd works itself into a frenzy. For the entirety of this bull market, we haven’t seen a frenzy. At most, we’ve seen a grudging acceptance that the economy was doing OK.

Now, the pessimism is fading.

But we haven’t yet ventured into the area of irrational exuberance. Folks aren’t borrowing money to buy stocks. Cocktail parties haven’t turned into stock-tip swap meets. Those are the things we expect to see at a top.

But the bears are slowly starting to change their message. Money is moving from bonds to stocks. Growth estimates are climbing.

As the market rises, we’re getting more skeptical that some of its moves can be sustained.

That doesn’t mean we’re calling for a crash. We’re not… yet.

We’re still bullish overall. Remember, market peaks lead to market peaks. When the market hit new highs last summer, we pointed out:

If you buy the market when it hits new highs and hold for a month, you have a 91% chance of seeing it go up from there.

If you hold for three months, the chance of a new high rises to 97%. If you buy at market highs, your typical one-year return would be a healthy 7.9%. (All these numbers are based on the S&P 500 from 1928 to 2015.)

The market is up almost 10% since then, hitting multiple new highs along the way.

Over the long term, we think that stocks will do just fine. But for the short term… the potential for a pullback is getting more and more likely.

That means it’s more important than ever to make sure your portfolio is made up of what I call Sleep Well at Night (“SWAN”) stocks.

I’m talking about opportunities that can pay you regular income – dividend stocks, master limited partnerships (MLPs), real estate investment trusts (REITs), utilities, preferred shares, corporate bonds and municipal bonds…

Again, these SWANs are investments that incredibly safe… but still produce way more income than you can get in a savings account, certificate of deposit, or Treasury bond.

The best part about these types of investments is that when you get the timing just right, you can find rare opportunities to “lock in” much higher yields than other, average investors.

That means that while other folks are making 3%… you could be making double or even triple that every year. More important, it’s safe. If you know anything about investing, you know timing the market isn’t easy to do on your own.

That’s why I write Income Intelligence.

I know I’m biased… I think Income Intelligence is the best kept secret at Stansberry Research.

Every month, my lead analyst Matthew Weinschenk and I go through every single sector of the market that can pay you regular income.

We give you a “big picture” look at the entire income landscape, tell you which of these investment classes is the best buy with the most upside, and detail which specific sector has the safest yield.

In every issue, we show which types of income investments are currently a BUY… which ones we recommend you HOLD… and which ones to SELL immediately. You’ll never have to wonder where to put your money again.

For the last several years, we’ve built an incredible track record of showing folks amazing ways to safely get more income than they’re used to getting.

We rarely invite new folks to join, but consider this your personal invitation…

Right now, I’ve found a little-known way to not only stick it to Wall Street… but also to get paid THREE times more than regular stocks.

See, while Wall Street usually doesn’t have your best interests at heart… they’re great at making money for themselves.

One study looked at hedge funds between 1998 to 2010… In that time, hedge-fund investors gained some $70 billion. But the managers of those hedge funds pocketed almost $379 billion in fees.

In other words, hedge funds made more than five times more money for themselves than for the folks who entrusted them with their money.

The sad, cold reality is that most investors underperform the market. And you won’t do better by trusting a money manager or a hedge fund to invest your money for you.

But what if there was a way you could partner with Wall Street… with a little-known strategy to get paid like a Wall Street insider… and get your share of these billions in earnings?

There is…

This Thursday, April 20, I’m releasing the details of an income investment that essentially allows you to become a partner in a Wall Street firm without having to work around the clock for years and years.

Its interests are aligned with yours. And by becoming a “partner” in this business, you’re entitled to a share of the earnings. No matter how much you plan to invest, you’ll start getting paid “Wall Street partnership fees” within a few weeks.

Better yet, you’ll get the “good” investments that are inaccessible to most individual investors. Click here for the details… as well as how to get access for more than 50% off. (This link does not go to a long video.)

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Retirement Millionaire Daily Research Team April 17, 2017

P.S. Every weekday I publish tips, tricks, and insight for a variety of wealth, finance, and healthcare. Sign up today for free, right here.

[retirementmillionaire]

Why You Should Ignore the Fed Rate-Hike Hoopla

Next week, you can safely ignore the Federal Reserve headlines…

The Fed’s decision to raise… or maintain… its interest rate at its March 14-15 meeting should have virtually no effect on your life or your investments.

So, considering the questions I’ve received about the Fed’s upcoming meeting… and the market-implied odds of a rate hike this month nearing 100%… I’m re-sending an updated version of a Retirement Millionaire Daily essay that I first published in December 2015.

When I first sent my “ignore the Fed” advice, many folks in the financial media were warning that a rate increase would send the stock market tumbling…

Bloomberg declared, “No One Knows How Messy the Fed Increase Could Get”… Business Insider warned: “The Fed’s rate hike could cause chaos in markets”… The Guardian called it the “rate rise heard around the world”… and an analyst at the Royal Bank of Scotland even issued a recommendation to “sell everything except high-quality bonds.”

All this fearmongering was ridiculous…

Not a single, coherent investment strategy relies on selling all of your positions based on a prediction of a market crash. No successful hedge fund, portfolio manager, pension fund, or private wealth manager operates on such a nonsensical scheme.

At times, you may increase your allocation to cash and defensive plays. You may add some short positions.

But the best way to minimize losses and stress in a market downturn is through asset allocation, diversification, and using stop losses… not changing your entire portfolio based on what might happen in the next month. Or worse, what has happened in the previous month.

And sure enough… the U.S. economy has kept “grinding on”… while stocks have done the same. In fact, the S&P 500 Index is up about 18% from the first time the Fed raised its interest rate in December 2015… and about 4% from its increase in December 2016.

For a few months, the-sky-is-falling pundits thought they were right… The market did pull back in early 2016. But the dip was several weeks after the Fed raised rates… And it was caused more by volatility in China than anything the Fed did. Before long, stocks had bounced back and have repeatedly set new highs since.

Here are four reasons why you should completely ignore what the Fed does next week…

No. 1: There Are Different Interest Rates There are lots of different interest rates… from interest rates on U.S. bonds to the interest rate you earn on your savings account.

The most chatter is about bonds… Bond prices and yields move in opposite directions. So some people are worried that the Fed raising interest rates means bond prices will fall.

Here’s the current interest rate you’d earn on different maturities of U.S. government Treasury securities, depending on time to maturity…

Here’s the point: None of these rates are controlled by the Fed… None.

They’re all controlled by supply and demand. If a lot of investors want to lend for five years, they’ll buy up the bonds and the interest rate on five-year bonds will decline.

The only interest rate the Fed controls is the “federal funds rate”… the rate at which banks and credit unions lend to each other on an overnight basis.

Now, in theory, if the Fed raises that rate, it would hurt bonds with longer maturities (what we’d call “further out on the curve”). But in practice, this effect is miniscule.

Supply and demand will determine what happens with the interest rates that affect everyday life most, not the Fed’s rate.

No. 2: The Change in Interest Rates Is Extraordinarily Small

If the Fed raises rates, it will be a very small increase – say, one quarter of one percent. The Fed will then, in the future, continue to raise rates very slowly.

That’s what we saw the last two times the Fed raised rates – in December 2015 and 2016. A rate increase of 0.25%. And remember that prior to the financial crisis of 2008, the federal funds rate was regularly as high as 3% or 4%. So we could have as many as a dozen raises before we’re at “normal” levels again.

Make no mistake about it, this is still an “easy money” policy.

No. 3: The Change in Interest Rates Is ‘Priced In’ and Meaningless

Financial markets are forward-looking… If everyone knew that a stock would be worth $10 tomorrow, they’d buy and sell until it was $10 today.

Markets aren’t always perfectly priced, but this rise in interest rates has been anticipated for years.

Again, in theory, higher interest rates drive down the price of bonds. This leads some to claim that the day the Fed hikes rates, bonds will plummet. But do you really think there’s an investment manager sitting on a pile of bonds who hasn’t considered that rates are set to go up?

As our colleague Steve Sjuggerud says about Fed decisions, “Let me ask you… how many crises have you been able to mark in advance on your calendar?”

No. 4: Stocks Perform Well When Interest Rates Rise

Many investors fear that rising rates will choke the life out of the stock market.

The theory goes that higher interest rates reduce profits for companies because they pay more to borrow… Plus, other interest-paying assets will look more attractive relative to stocks.

In reality, the Fed typically raises interest rates when the economy looks healthy enough to withstand it. Right now, GDP is growing, employment is strong, and even wages are growing a little.

In my experience, it’s the real economic factors pushing stocks up that outweigh the theoretical ones that could push stocks down.

Looking at historical data, when interest rates rise from low levels, like from 0%-4%, stocks tend to rise with interest rates. (It’s not as safe if rates start at a higher level… When rates rise from 5% and higher, that does tend to put pressure on stocks.)

Talking heads in the media place more importance on interest rates than they should.

Over the long term – spanning a business cycle that includes a recession and recovery – the Fed can certainly affect the path of the economy.

But if and when the Fed announces a change next week – it won’t mean much at all. Please ignore it.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Retirement Millionaire Daily Research Team Baltimore, Maryland March 8, 2017

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