Millennials tend to save less money than past generations, but are also more informed about long term financial needs. One distinct cultural difference between this generation and earlier ones is that Millennials grew up under the guise that going into $80,000 of debt for a college education was a worthwhile investment. On the surface, that may have seemed like a solid investment but unfortunately that wasn’t how it often played out. That said, it’s no wonder they made these risky financial decisions when the United States government and many states are following the same trope on a larger, more disastrous scale.
Scott Carter, current CEO of PM Capital and former professional baseball player, recently joined me for a frank discussion about a variety of financial topics weighing on Millennials. We covered the nation’s debt crisis, cryptocurrency, and the importance of building and diversifying investment portfolios ASAP. There is no magic advice to consistently making smart investments, but watching our interview may give you some guidelines to properly structuring your portfolio early.
With a quarter century of experience in the financial services and precious metals industries, Carter has served as the CEO of Lear Capital and Goldline, and as a senior executive of several Fortune 500 companies. What was most surprising to me is that Scott walks through his initial conversation with all prospective investors by asking them what their favorite fairytale character is - at first it made me wonder if his clients are all Disney executives. Some popular answers are Cinderella, King Midas, Rumplestiltskin, but those all miss the core goal of investing. Watch the interview clip to hear what HIS favorite fairy tale character is and why they should be yours too.
If you didn’t have enough time to watch the clip, the answer he’s looking for is Rip Van Winkle. According to the story, Rip Van Winkle fell asleep right before the Revolutionary War and slept for 20 years, waking up to a better life than he fell asleep in. (Jeez, talk about draft dodging.)
The moral of Scott’s fairy tale analogy, though, is that you want to invest in assets that have long term potential while consistently withstanding economic highs and lows. In other words, if Rip Van Winkle owned gold before he went to bed, his portfolio would still have similar relative value regardless of inflation or economic conditions.
Investment Strategies for Millennials
Ok, so now that we’re hooked with his fairy tale analogy, let’s jump into discussing investment strategies for Millennials with moderate annual earnings. For moderate to high-earning Millennials, Carter recommends investing 5-10% of your liquid portfolio in gold and silver. Many people aren’t aware of the value of diversifying their portfolios in the way of physical precious metal ownership. In fact, in the past century, the average investor has increasingly shied away from this area. It might be that gold and silver seem outdated, but Scott thinks a lot of it has to do with people not understanding how to treat the asset.
While gold and silver ownership doesn’t pay dividends, dividends almost never keep up with inflation and investing fees. Carter overlooks many enticing buzzwords stockbrokers throw at their customers and instead focuses on optimizing buying power into the long term. Preserving buying power has a lot to do with breaking even, though that isn’t necessarily exciting. He gives a great example about the cost of a new car in ounces of gold over the past century. The price of a new car in ounces of gold hovers just above 26 ounces, even today. Check out this clip for more:
Most importantly though, he advises Millennials to invest as much as possible while still living comfortably. “Lay off that extra vacation” is a phrase Scott adheres to in his own life. While it’s tempting to travel, dine out, and have the latest phone or designer fashions, dialing back your spending while you’re young is much easier than playing catch up ten years down the line.
Is Bitcoin A Way To Optimize Buying Power, Too?
While physically printed money and governments backing its currency with gold was the standard for generations, credit cards and computers changed the way we bank and buy. Since it seems like there’s a new buzzword every day when it comes to online buying, I asked Scott to explain the next frontier of currency: cryptocurrency. This new transactional method makes international transfer easy and efficient. Like the shift from cash to credit, the change to using Bitcoin will “fundamentally change the way we conduct business” according to Carter. To hear his full analysis of cryptocurrency, take a look at the clip below:
The holdup at this point is the transparency standoff. Governments have no way of tracking cryptocurrency transactions and that’s the point. The decentralized currency was initially conceived for private exchanges. The original Bitcoin transactions were negotiated among the involved parties and it has shirked many economic conventions throughout its almost decade long history. Scott thinks that the value of this new type of currency isn’t nefarious, but some financial experts remain unconvinced. For example, JP Morgan CEO Jamie Dimon accused Bitcoin of being a Ponzi Scheme, though corroborating evidence has yet to surface.
So How Do I Find The Right Long Term Investment?
Finally, Carter outlined the process for purchasing gold in the United States. The spot price, or an asset’s market price, is misleading to inexperienced gold buyers. It is impossible to buy gold at spot price, but the additional fees are proportionally small compared to other commodities such as gasoline. The normal cost to buy gold will be 2-25% above the spot price. Firms vary in the fees they apply for products, some charge at the buy and the sell, whereas PM Capital has no liquidation (selling) fees and only a one-time fee at purchase.
After purchasing ownership, there comes the matter of how and where to store. Most gold purchasers either store it at home in their safe or in a safety deposit box at their bank. For them, their shipments are sent discreetly and completely insured, directly to them. In cases of large silver purchases, independent storage (such as Brinks) may be preferable due to the weight and bulk of the silver. This storage is 100% insured and in the purchaser’s name. So if you’re thinking about including gold or silver in your portfolio, you should probably just let the experts like Scott help you make decisions about where you want to store it.
Scott and I covered a wealth of topics during this interview (including Illinois’ debt crisis - if you’re unfamiliar, he breaks it down beautifully). Checkout the full interview for more information on the value of diversifying your portfolio and starting to save money early. A sound understanding of both your personal financial situation as well as the global economy is essential to making intelligent investment decisions and accumulating wealth for the future.