By David Forest, editor, Strategic Investor
At the end of every month, I sit down and figure out what I spent. I tally up 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.
According to the Bureau of Labor Statistics, the average household aged 65 or older spends $50,220 per year.
At age 75, living costs are about $43,623 yearly.
That’s the average. You might need more, or you might need less, depending on your plans. But that’s a ballpark target on what’s needed 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 the S&P 500. Last year, the S&P returned 28.9%. In 2013, it did 29.6%.
But here’s the problem: that’s cutting it a little close. Plus, the S&P isn’t a reliable year-in, year-out gainer.
For example, if you’d invested $172,000 in 2016, you would have made just $16,409, a 9.5% return.
That’d cover less than half the yearly spending for an average person in retirement. And it looks like 2020 will be a mediocre year, too.
A Little-Known Strategy Fit for Billionaires
The S&P is on track to deliver about 14% this year. That’s solid – but not nearly enough for a year’s worth of living.
What really worries me, though, is the down years.
In 2008, for example, the S&P lost 38.5%.
And between 2000 and 2002, the S&P 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 a devastating result.
I think 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, I got that chance when I met John Pangere, my friend and co-editor at Strategic Trader.
John showed me his research on a type of investment called “warrants.”
Most investors have never heard of them. But they’re commonly known in the financial community. And in fact, their potential is so explosive, they’re used by some of the world’s most prominent investors… including Warren Buffett.
Regular readers know I’m a geologist by trade. And 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 it can have a massive effect on your retirement savings.
4,942% in Less Than a Year
The table below shows how an average $172,000 nest egg could have performed in the S&P during the best and worst years since 1970.
|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 very basic business. It sells mattresses.
|S&P 500||Purple Innovation Warrants|
|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 Strategic Trader subscribers in early 2019. And our readers cashed out in October 2020 for a 4,942% gain.
The really amazing thing is, those gains happened in under a year. And you don’t need 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 simple $1,000 investment would have turned into $50,421 in less than a year.
That’s enough to cover a year of living expenses in retirement.
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 $385 on your $1,000 investment in Purple Innovation warrants.
You might have 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.
More Than Just Beginner’s Luck
When people hear this, they sometimes think I’m cherry-picking an exceptional case. After all, there are even some rare stocks that return thousands of percent.
But with warrants – for reasons John and I will explain in coming issues of the Dispatch – these outsized gains are much more common than with regular stocks.
Another of our Strategic Trader recommendations, Blink Charging warrants, gained 2,805% in five months. That’s enough to turn a $1,000 investment into $29,050.
Four other warrants in our current portfolio are up between 168% and 528% as I write. Solid gains. And I believe they could see explosive growth like Purple Innovation and Blink Charging as the momentum picks up.
The only other way to get gains this size is using complicated financial instruments like call options or cryptos.
But like I said, it’s dangerous to push beyond your comfort zone in investing. Options are great for sophisticated investors who can dedicate a lot of time to studying the markets. But for regular folks saving for retirement, they’re extremely risky.
Warrants, on the other hand, trade just 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. It combines the high upside potential of specialized stocks… with the ease of mainstream indexes.
How to Put Warrants to Work in Your Portfolio
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 subscribers of our premium Strategic Trader service since 2019.
But this strategy is so lucrative… I didn’t want any of our readers to miss out on the explosive potential…
That’s why I decided to bring warrants to my Strategic Investor advisory.
I put together the first-of-its-kind, Five-Video Warrants Master Course to help you get into these life-changing picks with ease (current Strategic Investor subscribers can check it out here). It’ll go over everything you need to know before trading warrants… and reveal my top pick to get you started.
If you’re interested in accessing it… and learning more about the explosive potential of warrants, go right here.
And I hope you’ll join me in the Dispatch over the coming weeks to learn more about warrants… and how they can deliver outsized returns that could pay for years – even decades – of your retirement spending… in any of your favorite sectors of the market.
Keep walking the path,
Editor, Strategic Investor