How to tweak your returns from 7% to 9%. In this episode, I'm going to address the question, "What
are the best ways to diversify when using indexing strategies?" I'm referring to indexed universal
life in particular. You're going to be blown away with how you can tweak your returns from maybe
7% up to 9 or 10 percent. I've been doing this for years by diversifying into superior vehicles.
So, my name's Doug Andrew. I've been a financial strategist, tax minimization specialist for more
than 4 and a half decades. And so, I've helped people optimize their financial assets on a
tax-free basis since 1980. When universal life was first introduced. But in 1997, when indexed
universal life was introduced, I thought, "Oh, wow. And my average returns went from 7.2,
8.2, up to 9.2 and even 10.2 percent." So, let me first of all, explain indexing in a nutshell
and then how to diversify by using this. I'm going to go over here to this screen and make sure you
understand indexing in general. Be sure to rewind or check other uh episodes on this YouTube channel
because you can learn more about indexing. And at the end, I'll show you how to get my best-selling
book, 300-page book called The Laser Fund if this piques your interest. My favorite vehicle is a
max-funded insurance contract because it's the only vehicle in the internal revenue code that
allows me to accumulate my money tax-free, access my money tax-free. And then when I ultimately die,
it blossoms and transfers tax-free. And because, I put in the most money the IRS allows as fast
as they allow, actually, I'm self-insuring. My million-dollar policy has a million of
cash value in it in as little as 10 to 15 years. That's why I'm using it for living benefits. So,
I'm going to use a snapshot in time right now. And let's say I have a million bucks of cash inside my
insurance policy. Now, the insurance company has my million bucks in there growing with interest
based upon their general account portfolio. That's what this means GAB --general account portfolio.
And insurance companies will put some of your money out into triple-A and double-A bonds.
Sometimes they put their assets. And by the way, this is billions and even trillions of dollars of
assets. One company where I have some of my money manages three and a half trillion. That's as much
as the IRS clicks in taxes in an entire year. And so, they diversify it and they have earned
in the last 30 years between 5 and 17 percent on their general account portfolio. This is like
mortgages on skyscrapers and shopping malls and double-A and triple-A bonds and all kinds of
investments. But they're very, very careful. Now, the average has been 8 to 9. For many, many years,
I never earned less than 11 and 3 quarters on my universal life from 1980 to 1990.
But it got increased. When interest rates started coming down, they came out with indexing so you
could still experience these kinds of rates of return even though the general account portfolio
maybe was only earning 6. So, the question is --How can an insurance company that's only earning
6% on their mortgages and on their bonds in a low-interest environment, if they're only earning
6 and they need one of those percentage points for them for their profit for their overhead
and they're netting 5, how can they afford to pay me 8 or 9 when they're only earning a
net of 5? Well, anytime I want, I can settle for the 5. If I feel bearish about America,
I think we're headed for a dip or a recession or a crash. And so, I can just say, "Pay me the
general account portfolio rate." That's 50 grand in this example. I can take it out. It's tax-free.
I can leave it there it compounds tax-free. But anytime I feel bullish about America, I can link
the return they're going to pay me to an index or indices that they offer. Now, many of the
companies where I put my money offer 10 or even 15 different indices to choose from. The most common
is the S&P. So, let's use this. If I choose to link to an index, then what I'm telling
the insurance company is "Don't you dare put my million out in the market at risk." Really, okay?
Yeah, that would be an index mutual fund. No, the million has to stay safe in your insurance company
earning 5. I'm willing to give up the 5, that for sure 5%. That's 50 grand. You can do whatever you
want with that 50,000 to have the wherewithal to pay me whatever the index change is for that year.
The index is simply a measuring tape. How much did the economy grow? So, for example, 2011-2012. I
linked because it was an election year. And so, it was an incumbent, Obama running for a second
term. I knew my chances were better than not the economy would go unless there was some unexpected
terrorist attack or something. So, I wanted to protect myself. So, that if the market crashed,
I would not lose one dime of my principle. I'm just giving up the for sure 50,000 when I link.
If the S&P was $1,000 and a year later, it was 1,100 that's a 10% increase. They must pay me 10%,
that's 100 grand. It's tax-free. How can they afford to do that? What do they do with my 50,000?
They bought upside options in the S&P. This is a no-brainer. They're the number 1 purchaser
of options in the world. So, they buy options. So, if the S&P goes up 10, the 50,000 of options
doubles to 100(Thousand). Sometimes if it goes up to 15%, 50,000 thousand triples to 150,000.
But they only have the interest on my million to work with. They don't have the million. So, they
have to cap it. So, this is called a zero-percent floor of 15% cap in this example. During that
decade, I actually capped out at 16 and 17 percent. So, I'm being very conservative here.
So, that means in that decade, there were actually 5 lost years and 5 gain years. 5 of those years,
I earned zip but I didn't lose. I still kept my money. The other 5 years, they paid me
up to a cap. Only 2 of the years did it hit the cap. But I averaged 7.23% during that decade.
The million I started with in the year 2,000 doubled to 2 million by the end of 2010.
Whereas most Americans who had their money actually in the S&P, they were barely back
to break even. It was the lost decade. They barely had their million back. They lost 40 twice and it
barely made the money back that they had lost. I doubled my money, okay? Now, there's other choices
you can choose to have a 2% floor so that if the market crashes they kept 20,000 of that 50,000 on
hand for you. The other 30,000 bought options. But they lower the cap to 13. So, I've averaged
actually 8% over the last 30 years with that one. Or you can take the floor back down to zero
and keep the cap at 13 but the insurance company will pay you 140%
of whatever the S&P does. Because they're able to use the full 50,000 for options but they don't
have to pay you any higher than 13. But if the S&P only goes up 5, I get 7 because they pay me 140%
of whatever the S&P does. And people say, "Which one did you choose?" All of them.
See, I diversify in superior strategies. I could have 30% of my million linked to this one.
30% to this one, 30% to this one. And the last 10% just leave it there earning 5. And I tweak
my return to 9.6% by diversifying. Well, you can even do more than that. Are you ready? See,
with these choices, these are different indices. And at the time, this is back 2000 to 2010.
Here were some of the caps and so forth. And here was the average. 30-year rate of return,
pretty predictable right there, right? That's if you put all of your money in that one.
But when you begin to diversify, you get an average and it's safer. But sometimes I do it even
different than that. You can use multipliers. You can diversify you can use low volatility indices.
So, let me share what that is all about. So, before I go any further, do you know anybody who
lost money in 2008? Maybe 40%. They felt like they had lost their future for the second time in that
decade. Maybe you experienced that. So, pay close attention. I'm going to empower you to never lose
again due to market volatility and diversify the smart way instead of having your money exposed to
risk in the market and being told by your advisor, "Oh, hang in there. The market always comes back."
Well, people did that for 12 years and barely got back the money they started with 12 years earlier.
Many people using indexing and what I'm going to show you next tripled their money during that time
period. Tax-free. So, let me show you this. And then at the end of this episode, I'm going to
empower you with a free gift. A book where you can learn more about this. I know is probably
hard to see on the camera. But when you look at this, this is actually a copy of a year-end
statement for one of my son's clients. All I want you to listen to and understand is this: It's one
sheet of paper. They had... Golly, I think it was about 7 or 8 hundred thousand dollars diversified.
20% was in this one, the Barclays US Dynamic Balance index is called the BUDBI. And that year,
they locked in 13.65 in that year, okay? This is the next one. They had another 20% of their
money in the S&P 500. They locked in 11% on 20% of their money. Then they had 20% in the Nasdaq.
And they got 9.5 there. And then they had the S&P 500 select index performance, okay? 15% there. And
they wanted us play it safe. They left the last 20% of their money in the insurance company in
the fixed portfolio which that year was 4.4%. Now, that's diversification. You add up all those and
they averaged over 10.5% rate of return that year tax-free by diversifying between 5 of them. So,
you can diversify. What I want you to understand and what you'll learn in my book is this:
There are times where I can show you a chart. And the S&P 500 over the last 24 years, for example,
has averaged just under 6%. Now, Dalbar who studies the stock market investor behavior says,
"Well, there are 20-year periods where it's averaged 9.14%." But I've always said, if you
earn 9, you have to buy and hold. You can't let emotions get involved when the market goes down.
If you're 9, you're only going to net 6 after paying tax on that money.
That's not very impressive. But the actual rate of return, the last 24 years on the S&P 500 has been
just under 6. If you're earning 6% and your money is in the market and the S&P is a good indicator,
you're only going to net 4 after tax because a third of it's going to go out the window in taxes.
That's why I tell people, "Get your money out of the market before you retire and put it into
an instrument that's going to be tax-free with indexing and not lose." So, how do you diversify?
Well, there's such an index called a low volatility index. And there's several.
I'm going to explain it simply to you right now. So, what is a low volatility index? If I showed
you a chart of the S&P 500, it's like a person with a yo-yo hopefully walking up some stairs an
average of just under 6%. But a lot of people have a lot of heartburn when the market drops 30 and 40
percent. When you have a low volatility index because the s p typically can vary like 20 24
or more. A low volatility means you are being very, very careful where your money is linked
so that the volatility is only like 4 or 5 or 6 percent. The most you may swing is 4 or 5 percent.
Now, how do they do this? I'll just simplify it. These large financial conglomerates will take a
look at at the top 500 like the S&P. And they'll look at them every single month or every 3 months,
every quarter. And they'll look at all 500 and they'll throw out 300 of them. 60% of them who
are sort of the most popular, maybe they're overpriced. And they look at the most conservative
that are the solid companies it's not just a short fad that the company's growing for some technology
or something. They take those 200 and they wake them. And they're able to then get a safer rate
of return. And so, it's more around that 4 or 5 or 6 percent range. And people go, "Well, okay." So,
what it means is you're earning an average of still 6 percent but you're not going down
and then having to wait and come back up and down and up. You're just going just like this. Now,
why would you settle for 6%? I thought I said you could earn more like 8 or 9? Yeah. Because
when you choose a low volatility index, the insurance company will let you participate
at 135%. Sometimes 155, sometimes 190 percent if you do a 2-year point to point. That means
if it goes up 6 and if it was 150%, let's say simple, you'd earn 9. They'd credit you 9.
Because they're going to credit you at 135 or 150, 155, 190 percent of whatever the S&P does. This is
where many people historically have been able to lock in gains every year. And some of those years,
it averages more like the 9 and 10 percent. In fact, if you chose a zero-percent floor in the
years 2001, 2002, 2003, 2007, 2008, zero could be your hero. By using the low volatility index,
during those down years when everybody else lost 40%, you could still be making 2 or 3 or 4 percent
during that time period. That is how you can diversify in superior strategies. So, I invite you
to learn more about how you can accumulate access and transfer your money tax-free. So, you can be
empowered to tweak your rate of return from maybe 6 or 7 percent up to 8, 9, or 10 percent. And
you can begin to reposition non-performing or underperforming assets to increase liquidity
and safety and earn greater rates of return. So, here's my advice: This is a an image of my most
recent best-selling book called The Laser Fund. And it's actually a 300-page book that is 2 books
in 1. This one is all kinds of charts and graphs and explanations. You flip the book over, this one
contains 62 actual client stories of how the laser fund is like a swiss army knife, financial swiss
army knife. A dream solution for so many financial goals. It will explain indexing in detail.
You go to laserfund.com. Laserfun.com. You just contribute towards the shipping and handling.
I'll cover the rest of that. I'll fire out a copy of this book to you. And this can be the beginning
of an amazing financial future to help you achieve financial independence safer and quicker.