Chris’ note: If you’re planning for retirement, today’s insight is a must-read.
A lot of folks stick to regular stocks to feather their nest eggs. But the upfront investment you need to fund just one year of retirement – not to mention the risk of a sudden crash like we saw earlier this year – may be too much for you.
That’s why I want you to pay special attention today. Colleague Dave Forest from Casey Research has unearthed a little-known strategy for funding your retirement. It’s even cheaper than buying stocks… and it has much higher potential upside. As you’ll see below, one recommendation following this strategy in Dave’s model portfolio went up 4,942%… in less than two years.
At the end of every month, I sit down and figure out what I spent.
I tally up my spend on food, gas, entertainment, and other costs of daily living.
I don’t have to do it. I’m not on a budget. But I find it interesting to see how much people spend to live.
This is the crux of planning for retirement. To figure out how much to save, you need an idea how much you’re going to spend.
Bureau of Labor Statistics figures show that the average household aged 65 or older spends $50,220 per year.
At 75, yearly living costs are about $43,623.
That’s the average. You might need more, or you might need less, depending on your plans. But that’s a ballpark target of what you need to be comfortable when you stop working.
So what does it take to pay for a year’s worth of retirement?
Let’s say you invest a retirement savings of $172,000. You’d need to make a 29% return in order to make $50,220. And you’d need a return of just over 25% to make $43,623.
Those returns are possible investing in U.S. stock market bellwether the S&P 500. Last year, it returned 28.9%. In 2013, it did 29.6%.
But that’s cutting it close. Plus, the S&P 500 isn’t a reliable year-in, year-out gainer.
If you’d invested $172,000 in 2016, you would have made just $16,409 – a 9.5% return.
That would cover less than half the yearly spending for an average person in retirement. And it looks like 2020 will be a mediocre year, too.
The S&P 500 is on track to deliver about 14% this year. That’s solid – but not nearly enough for a year’s worth of living.
What worries me most, though, are the down years.
In 2008, for example, the S&P 500 lost 38.5%.
And between 2000 and 2002, it had a run of three straight down years.
An average investor in 2000 to 2002 would have lost the equivalent of 1.5 years of retirement living expenses. That’s devastating.
The risk of losses on major stocks is one of biggest obstacles to people saving for retirement. I’ve spent years trying to figure out a safer way… without compromising upside.
Fortunately, it came together when I met John Pangere, my friend and co-editor at Casey Research.
John showed me his research on a type of investment called stock warrants.
Most investors have never heard of them. But their potential is so explosive, some of the world’s most successful investors use them… including billionaire super-investor Warren Buffett.
I’m a geologist by trade. Commodities are my bread and butter. I’ve used warrants many times as part of investments I made in mining companies.
In fact, I’ve even issued warrants to billionaire investors in companies I created in the past.
But John showed me ways to use warrants to invest in some of the biggest, most mainstream sectors of the stock market.
And they can massively boost your retirement savings.
The table below shows how an average $172,000 nest egg could have performed in the S&P 500 during the best and worst years since 1970.
|
S&P 500 |
|
|
Amount invested |
$172,000 |
|
Maximum gain in a ~1-year period |
$58,669 |
|
Maximum loss in a ~1-year period |
-$66,220 |
Now, let’s compare this to the performance of a real-life warrant for a company called Purple Innovation (PRPL). It’s a basic business. It sells mattresses online.
|
S&P 500 |
Purple Innovation Warrants |
|
|
Amount invested |
$172,000 |
$1,000 |
|
Maximum gain in a ~1-year period |
$58,669 |
$49,421 |
|
Maximum loss in a ~1-year period |
-$66,220 |
-$253 |
We recommended this warrant to our subscribers in early 2019. They cashed out in October 2020 for a 4,942% gain.
Amazingly, you don’t need to invest a lot of money to have a big impact.
Readers could have gotten in on the Purple Innovation warrants for as little as 19 cents. A $1,000 investment would have turned into $50,421 – in under two years.
That shows how important warrants can be for the average investor looking to grow their savings for retirement… without risking it all.
But here’s the best part…
Suppose the past year was a wipeout for the stock market. Even if stocks took a 38.5% shellacking, like in the 2008 crash, you’d have lost just a measly $253 on your $1,000 investment in Purple Innovation warrants.
You might have had to cut back on Starbucks lattes for a month or two. But it wouldn’t affect your ability to cover rent, food, or other necessities.
When people hear this, they sometimes think I’m cherry-picking an exceptional case.
After all, even some stocks return thousands of percent.
But with warrants, these outsized gains are much more common than with regular stocks.
Another of our recommendations, Blink Charging (BLNK) warrants, gained 2,805% in five months. That’s enough to turn a $1,000 investment into $29,050.
Four other warrants in the model portfolio at our Strategic Trader advisory are up between 111% and 454% over an average holding period of about a year.
Those are solid gains. But I believe they could see more explosive growth, like Purple Innovation and Blink Charging, as momentum picks up.
The only other way to get gains this size is using complicated financial instruments such as options or investing in the crypto market.
Options are great for investors who can dedicate a lot of time to studying the markets. But for regular folks saving for retirement, they can be complicated.
Warrants, on the other hand, trade like regular stocks. You don’t need a special account, or insider knowledge, to buy most warrants. You just plug in a ticker symbol like you would with any stock. You can even buy warrants through an online discount brokerage.
This is the retirement answer I’ve been looking for…
You can make life-changing profits… on easy-to-understand businesses… without risking large sums of money.
That’s why John and I have been bringing warrants to our subscribers since 2019.
But this strategy is so lucrative… I didn’t want any Legacy Research folks to miss out.
That’s why I put together the first-of-its-kind Five-Video Warrants Master Course. It will help you understand how to profit from warrants with ease.
It goes over everything you need to know before trading warrants… and reveals my top pick to get you started.
If you’re interested in accessing it… and discovering more about the explosive potential of warrants… go here now.
Keep walking the path,
David Forest
Editor, Strategic Investor