Hello again. In this episode, we are going to answer the question "Where is the best
place to invest money?" This is an exciting topic because there are so many
people especially in America that make the wrong choices. And down the road, they
have absolutely unacceptable regrets but they made choices early because they
were not informed. So, you're going to get a vision in this episode about the 3
key elements of a prudent investment. I'm also going to talk about the 3
biggest dangers that erodes away the money that people try to sock away in
order to get ahead financially. And I want you to have a transformation so
that you'll know exactly what you can do to choose the right investment vehicles
based upon these key elements.
So, I have discovered through the school of hard knocks from experiences that I
don't want you to make the same mistake. That there are 3 key elements of a
prudent investment. And this relates to real estate your money in the market. And
so, I learned this. In fact, I have a little acronym that stands for LASER. But
these are the key elements of a prudent investment in order of importance. Number
1 would be liquidity. The ability to access your money when you need it with
maybe an electronic funds transfer or a phone call. Number 2 would be safety.
And not just safety of the institutions but maybe safety your principal. Not just
maybe. That's a critical part because you want to make sure when you set aside
money you don't lose your principal. Now, I have an additional definition of
safety. Any year that I make money, I don't want to lose in the future what I
made in the past. And a lot of advisers don't know how to do that. Number 3
would be to earn predictable rates of return. A lot of times people don't
understand how to create predictability on their money. And I'm going to show you
how to do that. Let's see it's in this order, those are the 3 key elements.
If it has tax favorable accumulation or access to your money, that's sort of
icing on the cake. But LASER is liquidity safety rate of return. a lot of times
people get these in reverse order. Now, I like to have my cake you need it too. So,
I like all of these features. And I'm going to show you here the importance of
choosing the right financial instruments. Because in this diagram, I have arranged
16 general categories of investments from highest risk to lowest risk. And we
always want to put our money in a place that will have the highest possible
return but at the lowest risk. And so, what I'm going to do here is apply the
liquidity safety and rate of return test quickly. When we applied the liquidity
test, this many failed. See, we have business
ventures limited partnerships. Number 4 would be raw land. Down here, equity
in your house. It is not readily accessible when you need it. You need to
be able to access money and maybe 24 hours with like I said an electronic
funds transfer a phone call. When we apply the safety test, this many more do
not pass the safety test. Commodities and we look at some of these other items
--8 and 9. A blue chip stocks, high-grade bonds and so forth. Many times
you can experience loss or else you're not earning a return greater than the
cost of living increase inflation at the time. When we apply the rate of return
test, this many more fail because you have to have a rate of return that is
equal to or greater than the inflation rate at the time. You can have your money
like in a bank or credit union earning just 1%, you're going upstream at the
rate of one mile an hour. But the current of inflation is coming down at 3,
4,5, 6, or 7. And so, you're going backwards. When we apply those and
then the tax benefits... Well, there's only a few things that allow you to have some
tax benefits. But there is only one that allows you to take out the money
tax-free during the harvest years of your life --the autumn of life. And I have
a lot of education on my favorite vehicle and it's right here number 12,
it's called a maximum funded insurance contract. Which I think is one of the
places you should have up to 60% of your serious cash. So, there
are 3 key elements of a prudent investment. But there are 3 huge
dangers that we need to eliminate. These are barriers hindrances that cause
people to outlive their money when they're trying to choose the right place
to invest. Now, these dangers are number one taxes. And so, sometimes people think,
"Oh, well then I want to save tax on the money I'm setting aside" --the seed money.
Because many times I use the metaphor if you were a farmer and you had the choice
of buying your seed in the springtime. And you choose to not pay tax on the
price of the seed money. But later on after you plant, you water, you cultivate,
you work in the fall the harvest of life; now you
agree to pay tax but you were told you were gonna be in a lower tax bracket. And
that has not been true or axiomatic for almost 30 years now. And so, people are
shocked that taxes erode away probably between 25 to 33 percent of and their
retirement nest egg. If you have a million bucks, that's not really your
money in an IRA or 401k. The government has a tax lien of probably 25 to 30, 33
percent. Some people, 40% on that money. So, taxes are the first danger.
Number 2 is inflation loss of control that causes people to outlive their
money. Because every 7 to 10 years at the current real rate of inflation
for the last two decades, the cost of living will double. Which means the
purchasing power of your dollars will be cut in half. You will need 100
thousand in 7 to 10 years to buy the same gallons of gas and loaves of
bread that 50,000 buy earlier. The third danger is market volatility.
You should not have any more than 30% of your money in the market. I subject to
volatility when you retire. So, we want to choose the right places to invest our
money that we don't have to eliminate those dangers later because that is very
expensive. You want to prevent and avoid those dangers in the first place.
So, I'm going to show you three places that people put their money and where I
put the bulk of my serious cash that I don't want to jeopardize. Do you remember
the story of the 3 little pigs? We had houses of sticks,
we had houses of straw and houses of bricks. So, let me use this metaphor.
Houses of sticks would be what I would call a moderate risk investment. That
might be real estate where real estate over the long haul usually appreciates
pretty well. I mean the appreciation rate in many municipalities is 3 to 4
percent a year. And if you're you the rental property, you can usually... We
got a pretty good rate of return depending upon the market. But sometimes,
a real estate drops in value dramatically like in 2008. And many
people homes went down in value 30 and 40 percent. So, sometimes the house of
sticks gets blown down by the big bad wolf. Who's that? That's not the IRS. Some
people say that. It is all of the things that cause the economy to be topsy-turvy.
Over here in the house of straw is higher risk and I would equate that to
the stock market. Mutual funds and so forth. And so when we have our money in
the house of straw, the big bad wolf here can blow down the stock market and it's
very volatile. Some days of the drops are dramatic. But the real estate market is a
little bit slower. So, that's why we put it here. Now, I put my serious cash safely
tucked in a house of bricks. People asked "What serious cash?" The money that I set
aside that I don't want to lose. It's for my future, my retirement. Maybe my
kids college education. And so that's serious cash. Over here, this house of
bricks, you can put money in a money market or a CD or even annuities. But the
rate of return is sometimes pretty pathetic. And so, it doesn't pass the rate
of return test. The safety test over here is where I'd like to put my money in
triple-A and double-a rated insurance institutions. Because that's where banks
and credit unions but their money for liquidity and safety. But the lowest risk
here. So, the point is when my money is safely tucked in a house of bricks and
my favorite vehicle --I call the laser fund but it's a max funded insurance
contract. Because it is the only vehicle in the Internal Revenue Code that I
teach in other episodes that allows you to accumulate your money tax-free. Access
the money tax-free. But when you die, it blossoms, it increases the value and
transfers tax-free. I've earned average rates of return of 8 to 9 percent net
cash on cash. And the money is safe here. So, when the real estate market and the
stock market blows down, I can sleep with wind blows because my money is not over
here, it's over here. And in other episodes, I can teach you how to link
your money so that when the real estate market does well, you do well. When the
stock market does well, you do well. You get to participate. But when the big bad
wolf blows them down, you don't lose. So, if you're thinking, "Wow, this is pretty
incredible." Sometimes it seems overwhelming. But we need to get educated
because it will cost you dearly down the road. So, the answer is you choose the
investment vehicles that will pass the liquidity, safety and rate of return test
with flying colors. And any tax benefits or icing on the cake, you want to
eliminate the dangers of taxes and inflation and market volatility. And so,
this is why I write many books about these topics. These videos are not
designed to try to sell you a book. In fact, you can have a copy absolutely free.
You go to laserfund.com and click down here. And you can obtain one just for a
nominal fee of like 5.95 shipping and handling. But the reason why
I'm recommending this is because these pillars stand for liquidity, safety, rate
of return and tax benefits. And any investment that you want to put money
into, you can score yourself on a score of 0 to 10, Liquidity, safety, rate of
return. In other episodes, I will teach you that most investments IRAs,
401Ks, money in the market only scores may be at 18, 19
20, 21 out of a possible 40. The laser fund where I put 60%
of my serious cash passes with 33 to 35 out of 40. Nothing else that I
know of comes that high. So, my wish to you is to have a brighter future by
getting educated on where to place your hard-earned money to pass the liquidity
safety rate of return test with flying colors.