Yesterday I wrote an article about inflation. Inflation is one of the top things I plan for with my clients. It has been the ruin of the American dream. The topic I want to cover today is near and dear to my heart. It is the topic of the stock market. Now, I was a traditional financial advisor from the ages of 18-23. I was very good at it. I made more than 6 figures per year running my practice, had many clients, managed millions of dollars, and even earned an endorsement for investing from Dave Ramsey. My point? I know my stuff when it comes to this topic. My focus today is what is wrong with the mutual fund/stock market way of investing. Here we go!
1. Two different ways to invest. There really are two ways. The first way goes like this: you buy a thing, you hope someone is willing to pay your more than you paid for that thing, you sell the thing for a profit, you live off the profit, and hope you don’t run out of money or things to sell. It sounds crazy, but that is the way appreciation investing works!
The second way goes like this: You buy a thing. Someone pays you money to use the thing. You collect payments as income and live off the income. You keep the thing forever because it doesn’t make sense to sell something that pays you every month. You simply focus on acquiring more of those things that pay you each month.
When it comes to retirement, appreciation investing, is essentially the plan of hoping you die before you sell all the things and run out of money. Income investing is a plan of asset acquisition to outpace inflation with the income.
2. What is a “share”? A share supposedly represents an ownership stake in a company. It is a paper certificate saying you own the business to some degree. But do you really? Let’s re-associate the concept of “ownership” and pretend the ownership rules of a stock are congruent to owning a car. 1. Someone else votes on what happens to your car.2. If the car is sold or liquidated, bondholders, preferred owners, and other debtors are paid out before you. In fact, you are the last person to get paid. If the proceeds are gone by the time it comes to your payment, that sucks to be you. 3. The car could disappear due to insolvency and you are owed nothing for your ownership. 4. The car is might pay you income as a thank you for owning it, but that is not guaranteed. 5. You will pay fees every single year for the privilege of owning the car. 6. The car is invisible and you don’t actually get to drive it. You can only tell people you own it and show them what your ownership is worth. BUT there is one benefit! You can sell your ownership to someone else at a price dictated by someone else that you cannot negotiate up in your favor. Want a car?
3. The income is laughable. You have two choices with stocks, bonds, and mutual funds. You can sell your shares for profit and hope you don’t run out of money (you will, I promise) or you can live off the dividends. Here is the thing, the dividends are maybe going to be 2.5% if its a REALLY good stock. But you pay an annual fee on the account value, including the dividends. Let’s say the fee on average is 1.25% (that really is about average). So now your dividend minus fees is only 1.25%. On a million dollars, that will pay you $1,041 per month! Wow! You can pay rent and go to Denny’s 1 time in retirement! Are you glad you did that?
There are many more reasons, but these 3 are the most critical to understand. I do not recommend the stock market for anyone as an “investment”. You need real assets that produce income. The wealthiest in our country’s history have invested in small business and real estate. Success leaves clues and so does failure. Follow what the wealthy do and you will get what the wealthy have. Follow what the mainstream, middle class advice preaches and you will be just like everyone else you know. Click here to learn how to invest the right way!
Own Your Potential,
Jerry Fetta helps his clients make money, keep it, and multiply it.
He believes everyone should own their potential. He believes you were not created to spend 40+ hours per week serving the 40-year-to-life sentence trading your precious time for money just to live in mediocrity.
However, the truth is that time and money must be exchanged. It just doesn’t need to be you making the exchange.
Jerry helps his clients create wealth that exchanges time and money on their behalf.
His clients see a 30% increase in income, a guaranteed increase in savings rate, and 8-12% fixed annual returns on their assets in the 1st 90 days of working with him.