The Right Bond for Your Retirement

By Charles Delvalle

Dear Reader,

A few weeks ago, my girlfriend’s grandmother asked me a question.  And the answer to her question is one that should help you collect more money during retirement.

You see, Grandma (as I call her) has $50,000 she needs to invest for retirement.

She’s already 64, and plans on retiring in the next few years.  But her Social Security check and pension barely give her enough to live on.  So she wants that $50,000 to be put away in a safe investment that gives her income every month.

What should she do?

Her first thought was putting it into an IRA and collecting four percent per year.  When I first heard about this plan, I flipped out.  This would give her $2,000 every year, or only $166 a month.

Heck, she could invest in government bonds and get a 4.69-percent yield.  That’s $195 a month, a boost of $29.

The other thing she thought about doing was putting this money into an annuity.  But the problem is that the $50,000 wouldn’t pass on to her children (even though the annuity may continue paying them for some time).

So what should she do?

The answer is to put her money into overseas bonds.

Sound risky?  In reality it’s not.  There are plenty of countries that are actually doing better than the United States.  And they pay a higher yield, too.

For instance, I would recommend for her (and anyone ready to retire) to invest in Australian government bonds.  Right now the Australian economy is rapidly expanding on the back of increasing commodity prices and exports to China.

And they pay a nice 6.75-percent interest rate to boot.

Putting $50,000 into this investment would give Grandma roughly $281 a month.  That’s $115 more than she could’ve gotten with an IRA.

And the best part is that these interest payments are paid out in Australian dollars and then converted into U.S. dollars.

If the Australian dollar keeps appreciating against the U.S. dollar (click here for my recent discussion about the Australian dollar), she should continue to see her payments increase.

And lastly, not only will she be able to pass those bonds on to her children, but the value of those bonds will likely increase as the U.S. dollar devalues.

I spoke to a good friend named Richard Panchookian of International Assets Advisory.  He told me that right now you could get a Queensland 10-year government bond yielding 6.4 percent.  And the best part is that it’s going for under par right now (under the $1,000 in AUD that it costs to buy them).

So when these bonds reach maturity, you get the $1,000 AUD instead of the $972 AUD that was invested.  And since they are 10-year bonds, there’s less risk of the Australian currency getting cheaper over time versus the U.S. dollar.

Buying international bonds is pretty easy … as long as you go to the right place.  Many of the bigger brokerages are able to trade these bonds, so call first and find out.  If they don’t, you can always go to a full-service brokerage specializing in international bonds.

In the end, putting your retirement money to work overseas is one of the best things you could do.  Not only will you get more money from the interest, but you also end up with more at maturity.

Good trading,

Charles

P.S.  To let me know what you thought of today's article, send an e-mail to: feedback@investorsdailyedge.com.

[Ed. Note: Two weeks ago, Charles told subscribers of IDEs Global Profits Hotline to capture a gain of 202 percent. To find out how to get these recommendations, click here ]

Market Watch

Responses to Last Week’s GM Article

By Charles Delvalle

Apparently, going long GM turned out to be a controversial idea.  I got a good amount of feedback – some of it good and some of it not so good.  So I thought I’d shares a few emails with you.

I agree the headlines often make people panic.  You may recall three years ago GM was going bankrupt … also about six years ago Philip Morris was going under etc. …
'Headline investors' often (not always) regret their knee jerk reactions.

--Marten W

I don't know what to think of it.  I won't follow your advice.  I just read an article, reportedly from the president of GM that said GM is on a slippery slope to bankruptcy, and stockholder losses will be great.  I read last year that Toyota is on its way to be the world's largest auto maker in 2007.  One writer said that GM had suffered a loss during 19 of the last 20 years.  It sounds like they took a large loss on subprime mortgages as well.  I fail to see any way back up for them.  I wouldn't buy their shares.

--Stan L

Your discussion of GM takes all the panic out of the headlines and gives the facts.

--Richard O

I want to thank everyone for their feedback and would like to make one comment to Stan.

That letter, which was reportedly from the president of GM, wasn’t really from the president.  I saw the article in another newsletter as well.

You have to wonder why the president of GM would ever say such a thing about his own company.  CEOs are never that truthful.  The last thing they want to do is cause a shareholder panic and have everyone selling their shares left and right.  After all, if the stock price goes down, the CEO gets poorer (since he holds shares).

Truth be told, I don’t see GM going under for at least the next 5-10 years.  Sure they have high legacy costs (a chunk of which is being phased out under the new labor agreement), and are not as profitable as Toyota.  But they will make it out of this a leaner and stronger company.

Just you watch.

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