Don't lose money. Zero is your hero. In this episode, we are going to address the
question what is indexing as it relates to investing money. This is one of my
favorite strategies that I have helped thousands of people achieve financial
independence. So, get ready.
My name is Doug Andrew and I've been a financial strategist for more than 45
years. But mainly help me people prepare for retirement, the golden years and not
outlive their money. And unfortunately, a lot of people who thought they had
enough accumulated in their traditional IRAs and 401Ks didn't see what I call
the deduction reduction coming when they retired. Because they have all this money
they had deferred paying tax on in a traditional area 401K thinking they
were going to be in a lower tax bracket and they retired and they work. They
start pulling up the money they have to pay tax at the same or higher rate as
they've ever been in during their earning years. And inflation takes its
toll. And pretty soon they realize they may outlive their money and many did. And
so, my favorite strategy for safe money accumulation in an investment, I actually
call it the Laser Fund. But in the Laser Fund which allows you to accumulate your
money tax-free under Section 72(E) of the Internal Revenue Code, everything you
earn is tax-free. But Section 7702 of the Internal Revenue Code teaches us how to
access your money tax-free and it's way better than a Roth because you can do
that with the Roth. But at the end of the day when I finally pass away, anything
that's left behind... Because most people leave behind something that would have
sustained them had they lived longer. If it's in an IRA or 401K, most CPAs will
agree that's the worst place to leave your money. Mine in my Laser Fund, it
doubles triples instantly and transfers tax-free to my heirs. Now, you can learn
about that. But in my Laser Fund, the best strategy is indexing. Let me give you
indexing 101 so you can understand this concept. I'm going to use the example of
a million dollar nest egg. Now, it doesn't matter if you have 100,000
saved at retirement, 500,000, a million, 10
million. We help people that are billionaires with this. But a million
dollars is a nice round number. And it's a good number
because I've always shown people every million bucks that you accumulate can
generate 80 to 100 thousand a year of tax-free income which is far
better than a million in an IRA or 401K. Because that's not all your money.
Most IRAs or 401Ks in the market they tell you to only pull out
4% or 40,000 a year and yet pay tax on that.Tthere's usually
another 10,000 and fees you have to deduct because that's the asset
management fee. 1% on a million. So, people pulling up 40,000 are
only netting 20,000 after taxes and fees.
I would rather pull out 80,000 or 100,000 tax-free and not
be subject to market volatility. And it takes indexing to do that. Now, when I say
indexing, a lot of financial advisors think I'm talking about indexed funds. No.
Indexing is a strategy. So, here we go. I'm going to share an example of a million
dollars and apply what indexing does. So, I alluded to my favorite vehicle which I
call the Laser Fund. And this is a maximum-funded indexed insurance
contract that has allowed me to earn rates of return averaging 10.07%
for the last 25 years. For the last 45 years, the
average has been 8.2%. Why the difference? Because the last 25
years, indexing has been around. It started in 1997. So, here's the deal: If I
have a million dollars of cash value in my indexed-insurance contract, I earn the
general account portfolio rate that the insurance company is earning that given
year. In the 1980's when this idea was first introduced by EF Hutton, they
weren't an insurance company, they were a brokerage firm. But they realized, it's
the only vehicle that allows you to accumulate money tax-free, be able to
access it tax-free. When you die, it blossoms and value and transfers
tax-free. I explained that in my various books that I've written. And what you're
really doing is you're using an insurance contract for a living benefit.
You're taking the least of of insurance the IRS will let you get
away with. Your putting in the most money that the IRS allows as fast as they
allow. And this thing turns into a cash cow. So, let's say I have a million
dollars accumulated which I do actually pretty quick in a property structured
Laser Fund. Here's the deal: Let's say I'm retired. If
I fill bearish about America that I think we're headed for a recession. And
many times I felt that way, I can just hunker down and settle for what is
called the general account portfolio rate that the insurance company is
paying. How do they afford to do that? Well, back in the 1980s, I earn between
11 and 3 quarters to 15.5% because interest rates
were high. CDs of banks were paying 10%. Bonds and and mortgage rates everything
like that were high. Well, the last 20 years or so, interest rates have been low.
Generally, the general account portfolio rate of most triple-A rated legal
reserve insurance companies has been between 4 and 6 percent. That is the
interest that they're earning on the average on all their mortgages on
skyscrapers and shopping malls. And the reason that they're so safe is they only
loan 50% loan-to-value, not 80% loan to value. So, if they ever have to
foreclose on a skyscraper, they come out smelling like a rose, they make money.
They put very little into stocks. They put it in triple-A and double-A bonds.
Let's use the decade, the worst decade since the Great Depression. The decade
from 2000 at 2010. I earned an average of 7.23%. If I would
have fallen asleep in the year 2000, I would have woken up in 2010 and I would
have doubled my money because 7.2%, a million would have doubled to
2 million. Now, I actually tripled to 3 million because I rebalance my
portfolio. If I had my million back then, the general account portfolio rate
was 6%. They need about one of those percentage points for them for their
overhead. And the net rate to me was 5%. So, 5% on a million
bucks would be 50,000. I can just take the 50,000. If I take it out,
it's tax-free. I can leave it there and it compounds tax-free. So, the next year, I
have a million fifty thousand, okay? It's tax-free regardless of whether I take it
out or I leave it the compound. Now, in a year that I feel
bullish about America... Now, when have I felt bullish about America? During an
election year where a come an incumbent is running for their second term. That
happened in 2011. Barack Obama was running for his second term and I've
learned that anytime an incumbent runs for office a second time, they'll make
the economy look like it's vibrant, dynamic and grown with all kinds of
fiscal and monetary policy. And so, I knew my chances were better that I would earn
more than 5% that year. And I was right. So, with the indexing strategy, the few
companies that offer it, I tell them I want you to pay me whatever the index of
my choice earns at the end of the year. And I chose
November 15th to November 15th of of 2012. That was the election year, okay? S,o
during that time period, the insurance company contractually must pay me.
Whatever that index does. What's an index? That would be like the S&P 500. You have
the Dow Jones. Let's just use the S&P 500. They offer that. So, the S&P they measure
it was it up or down from November of 2011 in November 2012. It was up, more
than 16%. But they have to cap me at 16. So, I earned 16% in 2012
instead of 5%. Now, some people say, "Well, how can they afford to do that?"
They capped me because they don't have my full million to work with. No. My
million bucks has to stay safe tucked in the insurance company earning 5. What
am I giving up? I'm giving up the for sure 5. See, 5% on a million is 50,000. So, I
relinquish the interest on my million. You can do whatever you want with that.
With that 5% enters that 50,000 to have the wherewithal to pay me whatever the
S&P does. And so, what do they do with this? It's a no-brainer. They buy up side
options in the S&P. So, if the S&P goes up 10, the 50,000 of options double to
100,000 and they pay me 100 grand. If they triple the
50,000 triples to a 150,000. They're big boys and girls. They
understand how to do that. And so, I earn 16%. Why do they cap me?
Because they don't have my full million. My million is safe. So, that if I guess
wrong and the market crashes, I don't lose a dime of my million principal. I
only gave up the 50,000. I earn zero and sometimes zero has been my hero.
So, by doing indexing, I have earned average rates of return at least
2.5% higher than the general account portfolio rate of the insurance
company. This is where I move from an average of 8.2 percent up to 10.07.
hen the market goes up, I get to participate to a cap. When the market
goes down, I don't lose. I may not make anything but
I don't lose. And by doing that in the worst decades, it's the Great Depression,
2000 of 2010, there were 5 down years versus 5 up years. Most decades have
7 up years versus 3 down years. If zero was your hero, 5 years.
But you earned whatever the S&P did in the other 5 years you would have only
reached the cap twice. But your average would have been 7.23%
tax-free. A million would have doubled to 2 million. Most Americans
were only back up to 620,000 at the end of losing
twice in that decade 40%. By rebalancing, I only earned zero 2 years. 2001, 2008.
The other years I just switched back and earned 5. So, I earned 5%
3 years. 0, 2 years. And I earned whatever the index did up to a cap of
16% the other 5 years. And I tripled my money. A million was worth
3 million. Most Americans didn't get back to a break-even of a million until
2012. This is indexing. And by using this,
this creates a tax-free accumulation vehicle that knocked
the socks off of any IRA or 401K or Roth. So, the key to indexing is don't lose
money. Zero is your hero. You can harness the value of indexing so when the market
goes up, you can participate in the upside. But when the market goes down and
it always will, you don't lose. If you think it's too good to be true, you need
to read this book The Laser Fund. It's explained in detail in here and you'll
see all kinds of examples of actual historical data that shows how people
have averaged between 7 to 10%. But some years like 2017, our clients earn 16 and
25 percent. The next year if the market would have crashed and gone negative 40,
they would have not lost the 25 percent they locked in the year before. Because
every year with indexing, you lock in your gains from the previous year and
they become newly protected principal. This is so dynamic. I want you to have a
free copy of this book. 300 pages containing charts, graphs, explanations,
and 62 actual clients stories on this side. This is about 12 chapters that
contain those stories. I'll buy the book it's free. You pay $5.95 shipping and
handling and i'll fire one of these out to you and you can be empowered and
learn how indexing can protect you from market volatility. And if you use the
laser fund, it's tax-free. And inflation will help you instead of hinder you. So
go to laserfund.com. L-A-S-E-R, fund, ".com". And let me send one of these out as a
gift to you.