you wondered why there are "bubbles" in our economy? Have you wondered
why these "bubbles" ultimately burst causing people to lose money?
is because money needs a home. Money needs a place to grow, combined
with tax advantages and a positive rate of return, that later in life we
can support the lifestyle we want.
(The video above was from a show I did over two years ago. Amazing how the principles shared here remained true and sustainable before, during and coming out of The Great Recession)
when the economic big bad wolf comes blowing by with hyper-inflated
prices, investors trying to time the market or negative news around the
world affecting Wall Street, how will your money stand up to this fury?
Here are the fundamental three homes for money:
House of Straw (Stock Market) - this is individual stocks, most mutual
funds, ETFs, even trying-to-do-it-on-your-own-day-trading. The simple
huff n' puff of the economic big bad wolf can blow down the daily value
of your investments. You can be hard at work, on vacation with your
family only to be saddened and frightened when you check your balance.
The risk of having your serious money here is the greatest. In fact,
the disclosure on the front page of a investment prospectus says, "You
may lose value..." When there is no ceiling on how much you can earn,
what goes with it is no basement either.
House of Sticks (Real Estate) - this has moderate risk, less than the
house of straw above, and a very common financial home with serious
money for most people. However, we have witnessed first hand how the
real estate bubble has blown away home equity that evaporated within
dropping property values.
House of Bricks (Insurance Contracts/CDs/Fixed Annuities/Bonds) -
within this financial house, we today have astounding savings accounts
and CD rates dropping to very attractive 1%, even while taking
government TARP money to rebuild the banking industry. (Yes, that was
sarcastic, just unbelievable to me) I can't tell you how excited I am to
have the opportunity to deposit my $100 in the bank and wait a whole
year to get four quarters back...then have to pay taxes on it.
have been a very attractive home for safe secure saving. Here's my
experience. I had invested in series EE bonds while serving in the
Marine Corps purchasing $200 bonds for $100, in the hope that they would
get close to being worth $200 by the time I left eight years on active
duty. Sadly, the value of these bonds didn't even come close to that.
"house of bricks" to consider are modern life insurance companies who
have innovated their insurance policies and/or annuity contracts that
offer living benefits where you don't have to die to receive them! Also,
the life insurance industry carries along with it significant tax
advantages and improvements in how their policies credit guaranteed cash
values no matter what economy we are facing, is something that today's
safe investor should be having conversations about.
my opinion, this has been a vindicated home for safe, serious money
that has shown financial strength during one of the worst economic times
in America. The big bad wolf has done a good job of blowing every other
financial home down and exposing weaknesses in traditional thinking.
You just don't hear, see or learn about insurance companies going
bankrupt or facing a "bubble"!
The problem is, the life insurance industry does a horrible job of educating the public about the financial vehicles they offer. After all, who would watch, "The Life Insurance Hour"?