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Investing Options – What’s Right For You?

Did you hear the US Bureau of Labor Statistics inflation index increased almost 7% annually for November 2021? Do you know all the options for investments that you can take advantage of? Know what’s best for your level of risk tolerance and the pros and cons of each investment option out there? Let’s talk about them.

Before I get started I want to talk first about inflation. Last year we had the largest increase recorded in a single year since 1982. This means your money can buy 6.5% less than it could last year. Back in 1982, the tax rate was 44 to 49% for the higher tax brackets as a side note. So how do you protect your money against inflation in 2022 and beyond? 15% of American’s invest in the stock market for the Rate of Returns the market can potentially provide. There are many risks in investing in the stock market if you are not a seasoned professional who can invest with no emotions and can be patient. See my video linked in the comments titled Why People Fail in the Stock Market for more details on that. In a nutshell, the average rate of returns for most investors is about 2% which would have been break-even for past inflation numbers. Today you would be at about a 5% loss if inflation rates continue like they are. 

Real Estate is an asset class that has historically risen in value faster than inflation. I don’t recommend investing in California for example so you have to be ok with investing out of state to make the numbers work if you started investing today in real estate and not everyone has the capital to invest in Real Estate, however, and if they do, they don’t want to deal with all the work and stress involved with managing too many properties as a landlord even with a property manager in place.

If you keep your money in a bank savings account, then you should know that according to the average interest rate on a savings account is a sad 0.06% and in my Chase savings account it’s more like a criminal rate of 0.01%. I don’t park my money at the bank anymore as 80% of America does. There are 6 Trillion dollars sitting in bank accounts right now. I just use the bank to shuttle money back and forth, I don’t park my money there in the bank where capital growth goes to die. Do you know the difference between average and actual returns? If you ever met with a financial advisor and they told you not to worry about losing money in the market because your average returns are between 6 and 16%? Well, let’s break that down to what that really means. Let’s say you have $1,000,000 and you lost 50% as what happened to my father in 2008 when the mortgage crisis occurred, then you would be at $500,000. Most people think that to get back to the original $1M investment you need to grow back another 50%, but look at this… 

If you lost 50% and you made 50%, your average is zero. But in actual capital left in your investment, if you lost 50% meaning the 500,000 dollars and you made 50% the year after, which didn’t happen and wished it did to help a little but let’s stick to the hypothetical example here, then you would not be back up to $1M but instead, you would only have $750,000. So your actual return is negative 25%. That loss example would not show up when the advisor shares with you the average returns that they calculated. Let me ask you, what are you more concerned with, your average returns or your actual returns?

So what are the options beyond the bank, the stock market, mutual funds, and real estate? There are two that I recommend to folks that I meet with and I like to put together a custom plan based on their investment and retirement goals for the future. You have old money that can be rolled over to what I like to describe as a self-funded pension plan like what companies used to offer 40 years ago and no longer do. This guarantees your rate of return above the rate of inflation with the amount growing every year that you begin retirement. Unlike the 401k, when that money runs out, you need to find another job, that’s not going to happen with this self-funded pension plan and some companies even offer a 5% to 20% bonus plan so that if you roll over $100,000, at 20% your investment would begin compounding at $120,000 starting the day you rolled it over. The other option is an investment which many call the Rich Man’s Roth because it has so many advantages that it alone requires its own YouTube video. It’s the new money option that I myself stopped investing into a 401k and on a monthly basis put my money into this account after tax so that it will grow 100% tax-free, no capital gains taxes on the amount ever, even if it ends up going to your beneficiaries there are no taxes to be paid by them either taking advantage of about a half a dozen tax codes. This investment is also bundled with protection from litigation, lawsuits, credit checks, government scrutiny, can be set up as a college fund, it’s none restricted, no early withdrawal penalties, it’s liquid unlike other investments, and you can borrow against this investment while the entire invested dollar amount still grows in the interest growth accounts. On on average these accounts have been growing 12% or better over the last 20 to 30 years and unlike the variable accounts that depend on the averages, this will contractually protect your hard-earned money. These accounts beat inflation and because the money is safe and will never lose a penny ever, it grows with the power of compounding interest.

If you would like to learn more, get some details, meet with me using the calendar link here in the comments section or on my page on the Get in Touch link at the top right of the page. It’s a new year, let’s get you started on the right foot for your financially free future.

”Why People Fail in the Stock Market” 

YouTube Video Link