My cousin Jimmy, who lives deep in the hills of Appalachia, runs a very successful chemical engineering business that places corn inside glass jars. Because he doesn’t want the government tracking his movements through a cell phone, he called me the other day using the pay phone at Rick’s Gas and Grill to talk about his asset allocation strategy. He is typically risk-averse with his cash and is distrustful of the folks on Wall Street. However, with inflation at 40-year highs, the value of his cash reserves is degrading. He is now interested in moving some of his money from the Mason jars under the tulip poplar to an investment account where he can potentially grow his savings. He is in his mid-50’s and would like to retire in the next ten years and move to a home near Pigeon Forge where he can go ride a rollercoaster at Dollywood, or race a go-kart at the NASCAR SpeedPark, any day of the week. Jimmy said that he’s, “Been watching property prices in the Smoky Mountains climb faster than a bobcat up a white pine.” Home values in the mountains have increased 143% over the past five years.
During our conversation we spoke about the benefits of a balanced investment portfolio of stocks and bonds. Despite the stock market declines of 2022, I told him the S&P 500 has averaged a gain of 10% per year from 1926 to November of 2022. An investment from 1926 beats inflation during this period for an inflation-adjusted return of 6.89% per year. Building a portfolio of 60% stocks and 40% fixed income has also been a proven strategy for steady growth, averaging 8.77% from 1926 – 2019. Putting Jimmy’s cash into the stock market can help him keep pace with, or even outgrow, rising inflation. This could keep his retirement dreams in reach!
He told me those long-term trends sound alright to him, and he would ponder moving some money while taking his next weekly load down to Knoxville in his 1988 Camaro Z28. With the cost of corn and copper rising, I think he will call me back. I’ll let you know!
Sources:
https://www.wate.com/news/rankings/cities-with-the-fastest-growing-home-prices-in-tennessee/
This hypothetical example is for illustrative purposes only, and its results are not representative of any specific investment or mix of investments. Actual results will vary.
