How to Catch Up on Your Retirement Funding
Become An Active Investor!
A great Emerging Markets Stock Idea
Let's suppose that you actually want to retire at some point in
the future. If you're like most people, you're probably a little
behind in funding that retirement and you're wondering if you can
It's important to know how this exact scenario has happened to
so many people, and the answers are actually pretty simple. Most
people in their twenties don't save; they're hormone-addled crazies
who can spend half a decade or more just celebrating not being in
school any more. (I still miss those days!) There are bars and
clubs to visit, clothes, electronics and cars to buy, apartments to
furnish, maybe some travel and probably a wedding. Even if there
aren't those college loans to pay off, there isn't much excess
income to be salted away.
In their thirties, people want to move out of that apartment and
into a house, which means a mortgage and more furniture. The
relentless ticking of the biological clock usually militates the
addition of small humans to the household of our rapidly maturing
non-investors. Small people don't eat that much, but their other
needs are pricey and absolute. Any excess funds that the house
doesn't eat will likely flow in Junior's direction. There is
probably some investing going on in the form of an employer-matched
401(k) or an IRA and a college-directed 529 plan, but that's about
The fascinating forties find most people with a growing income
that is more than matched by the requirements of a growing family.
A move to a bigger house, family vacations and the beginning crunch
of college costs keep the lid on any investing that isn't part of
the work/match program.
By the time people reach their fifties, their costs are finally
coming under control as earning power peaks, children graduate from
college and expensive marriages are planned and survived. But just
as people see the light at the end of the financial tunnel, they
also see the freight train of retirement coming right at them. And
it's a lot closer than they ever thought it would be!
All of us analysts at Cabot get lots of inquiries from people
who need to play catch-up with their retirement funds, and wonder
if such a thing is possible.
Our response is that we give advice about investing, not
retirement planning. At the same time, we clearly believe that
investors who are willing to invest the time, energy and (of
course) money in a disciplined and systematic way can indeed make
AND KEEP big money over time.
I work on the growth stocks side of Cabot, writing the Cabot
China & Emerging Markets Report. I have a lot of confidence in
the ability of Cabot's growth disciplines to produce market-beating
results. Partly this is because we have a system for selecting
growth stocks that makes sense. But it's also because the Cabot
system of market timing requires us to exit the market and go to
cash when the market is in a confirmed downtrend- staying out of
the way of the bears is every bit as important as running with the
bulls, or even more so.
So, do you have the capital to invest, the discipline to follow
the rules and a source of good advice to point you toward strong
stocks at good technical buy points? If you do, you stand a good
chance of being able to help yourself make up some ground on your
retirement. It may even be enough to put you onto that 78-foot
sailboat cruising the Caribbean that you've been dreaming
At the very least, becoming an active growth investor will get
you off your financial duff, which is what your mutual fund
managers have had you sitting on since the 20th century. The mutual
fund industry has done a wonderful job of selling the notion that
you can't time the market and that the only sensible strategy is to
shovel money into your 401(k) and keep shoveling no matter what the
market is doing or what the results are. Just keep shoveling, they
say, and eventually the historical uptrend in the market will catch
up with you and lift your little boat out of the mud.
The passive mindset engendered by that kind of self-serving
advice makes investors vulnerable to the kind of damage that the
2008-09 bear market inflicted. And the resulting pain often keeps
investors from riding the bull market that follows.
How do you get started? It's actually quite easy. If you have
money in a savings account, you establish a brokerage account-my
personal preference is for an online account, which will let you
make your own trades with the lowest possible commission costs-and
move an amount of money to that account and start trading.
(Obviously I believe that having a Cabot growth advisory like Cabot
Market Letter, Cabot Top Ten Trader or Cabot China & Emerging
Markets Report in your back pocket will go a long way toward
getting you off on the right foot.)
If you have an IRA, so much the better. You can use a portion of
it to trade stocks tax-free.
The Cabot website has extensive free resources to help you get
started and make your decisions. For my own growth investing, I use
a 10-position, equal-dollar allocation that allows me to keep a
close eye on my stocks and move to cash when markets turn
If you've actually been investing since you were in your
twenties, congratulations! You probably have a big enough account
balance to actually retire, and even the Big Bear of 2008 didn't
For those who have been putting off investing until you could
count the years until retirement on both hands, I say it's time to
Chinese stocks have been on a tear recently, rebounding from a
short, sharp correction in late June and running to new multi-year
highs. This has left some stocks stretched pretty far above their
25- and 50-day moving averages, which are used in the Cabot growth
disciplines as stand-ins for the stock's short- and
intermediate-term trends. When a stock gets too far above its
moving averages, a phenomenon called "reversion to the mean" tends
to exert some drag. The result is often either a correction of a
period of sideways trading while the moving averages catch up.
One way to get around this problem is to look for attractive
stocks that have only recently come public and are still largely
unknown to a wide audience. And in that category, one recent IPO I
LightInTheBox Holding (
, a Chinese online retailer whose websites are available to 80% of
Internet users worldwide.
LightInTheBox specializes in apparel, small accessories and
gadgets, and home & garden products. The company has been
around since 2007, and has developed ties with a wide variety of
Chinese manufacturers, allowing for direct delivery of products at
big discounts, and, in the case of wedding dresses and evening
dresses, customized to meet customers' needs.
LightInTheBox recorded its first profitable quarter in Q1 2013,
but revenue growth (up 72% in 2012) indicates that its method of
expediting factory-direct sales is gaining traction. The company's
website is available in 19 different languages and more than half
of 2012 revenue came from sales in Europe and about a quarter from
LITB is now trading just south of 17, and its 25-day moving
average (it hasn't been trading long enough to have a 50-day!) is
at 14.85. Considering that the stock came public at 9.5 in early
June, it has made excellent progress.
LITB is a stock I would classify as an attractive speculation.
It's probably best to let it settle down a bit from the excitement
of its IPO. But it's a great example of what emerging market stocks
can do when investors are feeling adventurous, as they are now.
If you'd like to follow the fortunes of more emerging market
stocks, Cabot China & Emerging Markets Report (which I write)
is a great source of ideas and guidance.
Editor of Cabot China & Emerging Markets Report
And Cabot Wealth Advisory