Wise Money Tools's Podcast

How To Retire Early (If you want to)

He everyone this is Dan with Wise Money Tools –

First off hit that like and subscribe button, lots of good videos coming!

I would guess if you asked 1000 people why the save or invest 999 of them would answer “to retire someday.”

Most financial planning revolves around retirement.

However, ask those same 1000 people and very few would know how much they need to save or how much income they will need.

Most financial planners will use the 80% rule.

This rule suggests that you will need to generate at 80% of your current salary at retirement in order to have your same standard of living.

So, if you’re making 100,000 a year, you need 80,000 during retirement.

The idea is by then your kids are gone, you no longer have a house payment, and so you can live on less.

Let me first say that I really don’t like the idea that you’re going to take a pay cut.

In fact, you’ve worked hard your whole life, maybe it’s time for a pay raise! Right?

And what about keeping up with inflation or the cost of living.

If you take a reduction in income, and your expenses continue to rise, is that a comfortable retirement?

Then you have some gurus telling you to shove all your extra money into paying off your home.

Sure, it may reduce your expenses if you don’t have a house payment, but what’s the trade off?

You may have 500,000, a million, two million tied up into a home that can’t produce income.

Always remember, a home although it might turn out to be a good investment, is actually a liability because it produces no income.

You’ll get equity appreciation, hopefully, but it’s dead equity.

It won’t help provide income.

Then you hear about passive income.

Passive meaning you don’t have to do anything. You don’t have to work for it, you don’t have to spend time managing it, it’s passive.

Your money simply sends you income each month or year.

We all want passive income at some point.

In order to get passive income, you need to have your money invested or saved in a location where it’s growing and sending you some of that growth for you to spend.

You’re not as interested in your money growing and building a bigger pile of dough.

You want your money to produce income.

I call passive income the golden goose.

Each month that goose lays more golden eggs and you can cash in those eggs.

Then the next month, here comes more golden eggs.

Now, here’s where the challenge lies.

After talking with thousands of people, there seems to be a common theme with their questions.

The 6 main questions go something like this:

Where can you put it so that its safe? We call this “no risk.”

No one likes losing money and the closer to retirement the more devastating losses will be.

Where can you put it where it grows so I’m building assets for retirement?

We call this the “Reward” for investing. If we’re going to invest, we want a competitive rate of return.

Where can you put it where you can have access to it?

We call this “liquidity or accessibility.” We never know when we may need funds for emergencies or opportunities.

Where can you put it, so that is produces passive income?

We call this “lifestyle” being able to keep your same lifestyle because your income is at least what you were making while working.

This is kind of the overall objective, right? Being able to get income that will last the rest of your life.

And then finally, if you want to leave something behind for your heirs, how will all that work?

This is called the “legacy” leaving behind assets instead of liabilities.

And finally, number 6.

How to reduce income taxes so that you can spend more. Is it possible to live a tax-free retirement?

So, when you’re deciding on an investment strategy, how does it stand up the test?

Risk

Reward

Liquidity

Lifestyle

Legacy

Tax-Free

Let’s think about what every traditional financial advisor will recommend and see if it passes the test?

Let’s look at the safe fixed assets first.

This includes, fixed annuities, CDs, Savings, Treasury Bonds, high grade corporate bonds, and municipal bonds.

Risk, no they are typically insured or guaranteed.

Reward, nope, very low returns.

Sadly, the returns are not even keeping up with inflation right now. That means every year your cost of living goes, and the returns can’t keep up.

Liquidity – you typically don’t use them for liquidity as there could be penalties, however you could sell or surrender them in a pinch.

Lifestyle – right now with these low interest rates no one could really live off the income or returns they produce.

A million dollars in a CD at 1% would pay you $10,000 a year before tax.

Hardly a positive lifestyle changer.

Legacy – you can leave your bonds and bank accounts behind, as long as you didn’t have to spend it all so that you could survive during your lifetime.

Tax Free – Annuities, banks accounts, and most bonds are taxable.

Municipal Bonds are tax-free, but still could be subject to state taxes depending on where they were issued.

Even without tax, the income is still very low to depend on for income.

So, you’re not going to get too far with fixed income products.

Next let’s look at one of the favorite investments for financial planner and that is, Mutual funds.

Risk, yes there is risk, in fact you take all the risk.

Reward? You hope so, I mean your risking your money.

Mutual funds after accounting for volatility and fees they end up on average at about 8%.

Then subtract taxes and you’ll be at 5-6%.

Is risking all your money worth 5-6%?

Liquidity – Yes, you can sell your funds, unless they are in a retirement plan, but you’ll sell them at the current market, might be up, might be down, and then you’ll pay taxes, and finally you’ll give up all future rewards.

The reality, they aren’t made for liquidity.

When it comes to lifestyle and income, you may be able to pull off income from the funds.

But again, you take the risk. What if you take out income, and the market drops 20% in a given year?

That is a double whammy! You may run out of money faster than you thought.

This is why Wall Street uses the 4% rule. You should not take more than 4% out of your mutual funds each year or you may run out of money before you run out of life.

Next, when you die, you can leave your mutual funds for your heirs.

They may have to go through probate, and hopefully you won’t die just as the market tanks.

And finally, are the tax-free?

The growth, dividends, and income are taxable. So, depending on your tax bracket that could take off 2-4% from your return each year.

The last one we’ll look at is real estate.

Because there is so many ways to get involved in RE, from being a lender, an investor, a landlord, a builder, a flipper and so forth, let’s look at having passive real estate into a real estate fund as an investor.

Typical real estate funds or Real estate investment trusts, called REITs, are popular with financial advisors.

These are typically done through hedge funds or partnerships.

So lets apply the test:

Risk? Yes, there is risk, you take all of it. Real estate typically will have some value and depending on the asset may take much of the risk off the table.

Reward – there could be a reward. Depending on management, properties, the economy, and fees, the successful syndicated real estate partnership will return around 8-12%.

Liquidity – not really at all. Some programs offer a buy out at some point, but that typically is not an attractive solution to needing your money.

Lifestyle – the returns if consistent and in a good property could produce income.

The issue becomes how long the program will last; in other words, how long will you get income.

And then the economy and the market, could the income be cut off in down market?

You really must study the program and what they are investing in.

Next, can you leave a legacy. Yes, the asset can be passed with potential probate and tax issues to deal with. Your heirs may not be able to liquidate it either.

And lastly – tax free. There is typically some decent write offs and deprecation with real estate which gives tax advantages early one.

However, at some point the income and any growth could be taxable.

Okay, so that’s a good start – lets end with using Leveraged Life Insurance.

This is a strategy that your traditional financial advisor has no access to nor knows it exits.

We’re running time constraints, so I’ll lightly touch on the 6 keys.

First, risk. All the assets are safe, and even guaranteed. You don’t have to worry about markets and crashes inside a highly rated insurance company.

Next, how about reward? Well, if you use our leveraging strategy, it’s not uncommon to get double digit returns over time.

In fact, higher than your typical mutual funds, where you risk all your money.

How about liquidity? Yes, you can access your capital for emergencies or opportunities, and by using the “loan” feature, your money can continue to grow and compound even when you are in need and using it.

Next is leaving a legacy. Nothing is better for a legacy than life insurance. You’ll leave substantially more death benefit than the amount you invested and all the growth and income.

There really is nothing like it for your estate.

Finally – if you do this right, the growth, the income, and the legacy can all be tax-free!

Think about your money growing tax free, then living off passive income, tax-free, then leaving behind more than your asset is worth all tax-free as well.

Alight, glad you stuck with me.

So, whenever you are thinking about retirement or maybe taking about it at work with colleagues, now you know

You can get double digit returns,

Keep your money safe

Keep it liquid

Create substantial passive income

Leave a legacy for your family

And do it all tax free!

If you want to see how it might work in your situation,

Click below on the link Dansgifts and there you’ll get more information.

You can even schedule a strategy session and we can talk about your situation, it’s certainly worth exploring.

That’s if for this video – don’t forget to like and subscribe so you never miss a video

Until next week –

Take care!

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Can you imagine, you bought a rental home 15 years ago, and now your 60 today.

Your hope was this rental would provide retirement income needed at age 65.

Sadly, it’s obvious there is no way this income is going to make enough of a difference for them.

15 years of dealing with the property, and now they are worried they may have made a mistake.

5 years away from retirement, they have to decide…..

Keep it, sell it, re-finance, or do something different, is it too late?

I hope you’re never put in this position, especially so close to retirement.

Let me tell you how it turns out….

But first, welcome, I’m Dan Thompson, I make sure that things like that don’t happen to you.

We have a proprietary process to protect your money, create tax-free growth and income, and at growth rates you’ve likely not seen before.

No use stressing and worrying about money, income, and retirement when you can create a predictable process to grow your wealth.

So, the other day I was in a casual conversation with this person in this situation with their rental.

My heart dropped. I mean, this was their dream, to be owners of rental real estate and make their millions, have all kinds of extra income at retirement, just like a lot of people think, right?

They thought that if they owned rentals at some point they spin off income that will provide a wonderful retirement.

Sadly, that’s not always the case…..let me explain…..

This couple bought a rental 15 years ago. At the time the home was 5 years old.

They originally paid 215,000 for the rental.

They put $40,000 down and carried a mortgage for the rest.

Over the years they put all the extra money into paying off the mortgage and it was recently paid off, 15 years later.

The rents have increased over the years, just a like they’d hope.

The current rental income is 2000 per month.

The home has appreciated in value to 300,000.

So, in the 15 years they increased their equity 85,000.

They put about 10,000 into repairs and maintenance over the years, like new carpet, some painting.

Their total investment with repairs is 225,000.

Now that the mortgage is paid, if we calculate their gross return on the amount invested it’s about 10.6%.

We get there by dividing 24000 (rents for the year) by 225,000.

After insurance and taxes their net income is about 8%.

There is a 50% rule of thumb that says over the life of rents, you’ll be able to keep and spend about 50% of your rental income.

This is after repairs, maintenance, insurance, and property taxes are paid through the years.

If that holds true, then the net return on investment is 5.3%.

If you divide 12000, (½ the rental income), by 225,000, amount invested we get 5.3%.

Now, they have 85,000 in equity appreciation too, that equates to about 3% per year growth over the past 15 years.

Finally, we want to know what the return is based on the current value of the home?

In other words, right now they have 300,000 tied up into the home when we include the equity appreciation. That is how much money they have in the home sitting in equity.

If we divide the annual rental income of 24,000 into 300,000 equity, we get 8%, gross, after taxes and insurance it falls to 6%.

And using the 50% rule of thumb when we divide 12,000 by 300,000, their net return on the entire home’s equity is 4%.

In other words, $300,000 is getting about a 4% net rate of return. Oh, this is before income taxes too.

Okay, so those are the parameters. They are essentially doing 4% on their money, plus some equity appreciation.

First question is this. Is all the works, management, dealing with renters, maintenance, repairs, late calls at night or on weekends with the hassle of a 4% return?

You might say, well they could turn it over to a management company, but that takes about 10% of their rental income. Now their real return drops even more.

The question they had what should they do at this point?

Should they sell?

Should they sell and buy another rental?

Should they refinance and pull some cash out?

Should they get the cash out and buy more properties?

Their overall goal is to create income so they can retire in the next 5 years and have the income they need or want.

So, we kind of worked backwards.

If they kept the rental and just lived off the income, lets again assume they can spend half, that means they have 300,000, the properties home value sending off 12,000 in income.

Or about 1000 per month.

Over the years it’s possible that the rents will go up, so maybe they’ll get more income incrementally over the years.

300,000 working for you and only providing 1,000 per month may not be adequate.

So, the next question is, should they sell?

When you apply the Buffet rules to investments – you never sell unless the story changes.

In other words, is the property doing what they want it to do or thught it would do.

Interesting, they seem to be happy with having the home. I don’t know how deep they get into their numbers and know their real return, but they seem to be happy with the outcome.

Buffet would simply ask, is the home doing what we expected it or wanted it to do?

I’d ask is the home keeping up with market conditions?

Is the investment is still producing the expected results?

Is the home in a good area for rentals and equity appreciation?

If those things are still true – then you don’t sell. The story and the reason the bought it seem to hold true still.

They were happy with the home, the rents, the appreciation, so then, there would be no reason to sell.

The only thing that’s wrong is it’s simply not going to produce adequate income that they need.

They didn’t do a lot of research to see if there was something better. They simply assumed since RE is a good investment overall, and other people wanted rentals, that it was the best thing for them to do as well.

The next question you have to ask if they did sell, what would they do with the money?

In other words, you don’t want to sell if the story hasn’t changed, and you never sell unless you have a better place for your money.

Sitting idly in cash won’t improve their situation.

The next thing they thought of was to sell this property and buy a more expensive piece of property that would produce a higher income.

In other words, maybe sell and put the 300k into a million-dollar property? Most likely commercial.

The mortgage would be 4300 per month. So, they’d have to have rents more than 4300 plus taxes, insurance, maintenance and repairs.

Then a couple of decades from now, when rents go up, and mortgage goes down, they might be able to have a greater income. They might be able to double their income.

The next idea is to leveraging their equity into buying other properties.

Let’s suppose they could get 225,000 out of the home by refinancing (about 80%).

They may not have adequate income or rents to assume this new mortgage by refinancing, but let’s say they do.

With the 225,000 they could use it to put 20% down on several homes.

If each home they bought was 300,000, they would need put 60,000 down for each home.

Let’s say they can get 4 homes – I know that’s not quite accurate, but maybe one of the homes was 250,000 or less.

Now, if they were getting the same rents, all at 2000 per month.

That’s 8000 per month.

However, we’ve got mortgages.

The cost of the mortgage will be about 1500, plus insurance, plus taxes for each home.

They may be lucky to break even – let’s say they do.

So, there is no additional income coming from these rentals for several years.

Then down the road maybe they clear 100 per home or 400 per month in 6 or 7 years.

Then maybe they get that to 300 per month 10 or 12 years.

Now they are into their retirement 10 or 12 years and finally have 1500 dollars more per month.

I think you know where this is going. It may be a good strategy long term, but right now they have more cash flow than that with the one home.

There is no way even 4 new homes are going to produce the income they need to enjoy their retirement. Particularly because they want to retire in 5 or less years.

So that does not seem to be a good option.

What’s left?

Not much –

What they finally came to the realization is that rentals may not have turned out to be the income producing asset that they thought it would be.

So, what should he do?

What I did was assume they sold the rental, after his capital gains tax, ends up with 285,000.

What would it look like if over the next 5 years he put that into a compounding and leverage program, using life insurance as his base to keep the money safe and guaranteed?

Using current economics, this could potentially produce ______ in annual income, all tax-free.

Now, here’s an interesting contrast.

15 years ago, this couple put 40,000 into this rental to purchase it.

What if instead he did the wealth squared method, again by compounding and leverage instead?

Let’s project out at the current economics and see what it could be.

His income would produce 50,000 annually, tax free.

If they wait until age 65, it would produce 60,000, tax-free, and a few short years later 70,000.

Oh, and when they pass on, at age 90, over 2 million would go to their heirs.

Wonder what the house will be worth in 30 more years?

So, they didn’t start 15 years ago, is it too late?

Well assuming they could sell the home and we could put to work their 300,000 ASAP.

Projections show about 45,000 in income about the time he wants to retires. Again, that’s tax-free income.

More than double their current rental income and no way they could produce that kind of return from 300,000 in any other investment.

See the problem isn’t that they weren’t savers and they weren’t motivated to prepare for retirement.

It’s that they didn’t have many options in front of them.

Buy rentals, put it in the stock market, or stick in a savings account.

That is why we’ve got to give you this other alternative.

A way to save money safely, achieve above average returns, keep your money and your income tax-free, and create a substantially greater income than otherwise could be achieved with traditional financial planning methods.

So, don’t hesitate, take advantage of our free strategy session and see if it can help you too….

Remember you never get back yesterday – you don’t want to miss a day growing and compounding your money – that is the way to safely build your wealth

That’s about it….

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The Financial World Has Changed

I was reminded today of the massive changes that the financial systems have gone through in the past 35 years.

It’s been good for the do it yourself consumers, for the most part, and it’s been really good for Wall Street, but not right away.

When I first started in ’85, we had one quote machine in the office. We didn’t have computers on our desks and everything we did was by hand.

If one of my clients wanted to buy stock, they would call me, I would call the trade desk or go to the quote machine and get the bid and the ask of the stock.

If my client liked the price I would take out my order pad, write down the ticker symbol, how many shares, and if was a market or limit order.

Then I’d call in to the order desk, place the order, and hope it was filled quickly.

When the order was filled, I would get a call, write down the fill information on the order sheet, and call back my client.

Then I’d put all the orders for the day on a ledger and file it away for 3 years.

The cost to buy was generally 3% and the cost to sell was 3%. As you can imagine at those rates there weren’t a lot of trades in an account.

Think about it, if you bought a stock it would have to basically go up 6% before you even started making money. 3% on the front end and 3% on the back.

That could take a good part of the year or even longer depending on how well the market and that stock was doing that year.

A $10,000 trade order would cost 300 bucks to buy and another 300 bucks to sell, assuming you sold it for the same price, it would cost you more if the stock had gone up.

Very costly, right? Or so we thought…..

About 1987, computers began to be more affordable. I remember getting my first one, with a dot matrix printer, I thought I was in the big leagues now.

A year or two later we could subscribe to stock market quotes.

It was really expensive for live real time quotes and you could save some money if they were delayed 20 minutes.

Think about how that is today.

You can get an instant quote from 20 different website all day long for free.

Some brokerage firms will even display a constant stream of the market right to your desktop or device.

Then something interesting happened. The internet came along.

Information was being disseminated quickly and to about anyone who wanted it.

I’m not sure who was first, but the next thing to happen was discount brokerage firms popped up.

The first ones had flat fee trades of 97.00.

I know, that’s crazy to think about now days, but back in the late 80’s that was a bargain.

From that point on it’s gotten cheaper and cheaper.

I remember 10.00 trades, then 7.00, then 5.00 and now with M1 and Robin Hood you can trade for free.

The bid and the asked have narrowed as well.

What does that mean?

When you buy a stock, you pay the asked price and when you sell it you pay the bid.

As an example, suppose you want to buy 100 shares of a stock who’s asked price is 10.00.

Back in the day the bid might be 8.50, meaning if you bought the stock at 10, if you wanted to sell it you’d get 8.50.

Buy at the ask price, sell at the bid.

Another way to remember it is you always buy it at the highest price listed and sell at the lowest price.

The brokerage firm makes the spread.

So, before you made any money, the bid had to go up 1.50, to 10, and then you had to make up for your commission of 3% too.

And then you had to factor in the 3% commission to sell. All told you may lose 10% just between costs and the spread between the bid and ask.

This is why people bought stock and rarely sold it. They held on to it for years if not decades. A lot of investors took delivery of the stock certificates and then put them in a safe.

Costs were so high, and no one day-traded.

Day trading become most popular during the dot com boom when you could trade for pennies.

By the mid 90’s discount brokerage firms were taking over Wall Street, and access to instant information was at your fingertips.

Then brokerage firms offered cheap margin accounts so you could leverage your money and trade all you wanted for a fraction of the cost.

Did it help the investor in the end? Nope.

Few day-traders make money long term.

They get confident in up markets, and then suddenly during a crash their trading system doesn’t seem to work so well.

The long-term investors like Buffett bought a stock in the 1960’s and never sold. They’ve done so much better than day traders.

In fact, that philosophy has made him one of the richest men in the world.

Now Buffet didn’t do it because he couldn’t afford the commissions, he simply realized that if he were to buy great companies, when they are at a bargain price, he could hold onto them forever and do very well.

Most investors don’t have the kind of patience and certainly not the confidence that they picked the right stock.

Brokers don’t get it either, they think in order to be worth their salt, they need to constantly be moving client’s money.

I’d say a good majority of the investors and brokers out there are actually speculators, not investors.

I’d bet most people don’t know what they own or why they own it and what’s a good buy price and what would have to change in order to sell.

Brokers don’t do these kinds of analysis, they ride with the tide and what’s popular, and because of that they rarely, if ever will beat the market or protect your money in a crash.

Most people I see out there hand their money over to mutual funds or advisors and hope the advisors knows what they are doing.

Now that we have instant trading, quote machine on every phone, you can trade all day long for pennies, and never make any money….and often times lose it.

The other thing that has changed is brokerage costs to buy and sell have been essentially eliminated, and now the word on the street is to charge fees.

It’s called “AUM” and it stands for assets under management.

I was listening to an advisor talk about getting as much AUM as possible, that’s how he assures an annual income for himself.

Look, Wall Street wasn’t being generous and charitable to eliminate commissions for stock trades.

It is tremendously more profitable for them to charge fees. Let me show you.

Think about a guy who has 100,000 and back in the 80s buys 5 stocks for 20,000 each.

He pays $3000 to buy those stocks. Then most likely doesn’t sell them for 20 or 30 years.

Using a very crude 9% growth rate, and no dividends so all his equity is stored in the stock price and when he sells, he’ll pay capital gains tax rather than ordinary income tax.

Anyway in 20 years his stocks at 9% grow to $506,400.

If he sold the old fashion way where he pays a whopping commission, he’d get a bit of discount for the size of the trade, but let’s say it’s still 2%.

Cost to sell, $10,128. Total cost to buy and sell $13,128.

He then has a taxable gain of $396,272 (does not include his original 100k investment) and at 15% (plus state taxes) he’d pay roughly 59,440 in taxes and have 336,832 plus his 100,000 for total of 436,832.

The broker makes his commission and all is well.

However, now that brokers charge fees instead of commission, and we think, great we’re finally sticking it to those commissioned brokers. Let’s see how it turns out.

Suppose the broker says, we don’t charge commission, trade all you want, we simply charge a 2% management fee and we’ll trade, watch over, and protect your stocks for you.

Now because there is no commission to trade, chances are the broker will have you trading more often than not.

Rather than doing the research and holding on to one company for 20 years, they have you moving in and out of stocks with the tides, usually over diversifying you money because they don’t know how to buy stocks, they simply oversee the process.

This will often times cause short term gains which are taxed like ordinary income.

So how does this same person fare?

Remember commissioned broker took a total of 5% for both the buy and sell and the buyer held on to the same company for 20 years. It cost just over 10,000 for those trades the old-fashioned way.

In addition, the broker had to wait 20 years to make half of his money.

If the fees were only 2% a year, over the next 20 years instead of his stock portfolio being worth $506,000, it would only be values at 386,000.

A difference of $120,000.

It cost you $120,000 in fees because Wall Street convinced you that fees were better to pay than commissions.

That is $110,000 more than the supposed high commission way, if you paid 10,000 in commissions.

Can you imagine if a broker asked you to choose -

Would you like to pay us 10,000 over the next 20 in commissions?

or over 110,000 in fees?

Duh….

What was interesting is listening to this financial advisor on the radio on Saturday, he was talking like this was a good change for the industry.

He was saying that you can even find advisors who will work for 1%.

Using our same numbers that means instead of paying 10,000 in commission you would pay $94,000 in fees.

Over 900% more in fees and again likely less than average return because they move money around too much.

Oh it was a change a big change since 1985 alright, a big change for the good for wall street, not so good for you.

It reminds me of the story of the couple who went to this very ritzy yacht club and saw all these beautiful yachts.

They asked one of the deck hands, who owns all these yachts. The boy said, oh, these are mostly owned by Wall Street advisors and Walk Street execs.

The man then asked, where are the yachts of their clients?

The boy walked away perplexed….

It seems the clients paid for Wall Street to live pretty well.

Now let me say this, there are advisors who are worth their fee.

They do something unique or better, they protect your money from large downside losses or get you better returns than the market average because they understand investing.

They don’t simply put your money in a “diversified” portfolio and pretend they know what they are doing.

They actually earn the fee because you do better in the long run.

If you are paying an advisor to buy mutual funds or index funds, time to move on and save boatloads of dough!

And don’t get me started on 401k fees, this is pretty much the scam of the century!

Want to hear a real crime in pension funds? The fees can be as much as 6% on portfolios earning 4%.

This is why we have underfunded pensions – Wall Street is charging fees, it’s death by a thousand cuts!

They go upside down every year and no one really cares because at some point they think the govt will bail them out.

If you have a pension, you might want to see if it’s on the list of underfunded pensions. You may not like the long-term results.

Now if there was something good come from all this is that you can do a lot of this yourself.

You can open account learn to invest for nearly nothing. But you have to understand HOW to invest.

You can’t listen to the barber or your co-worker, you’ve got to put in the time!

If all you’re going to do is buy mutual funds or the index, you can get very low-cost funds and do it yourself.

You can easily do that without an advisor. Quit paying fees for nothing….and I can about guess 99% accurately that you’re overpaying for what you’re getting.

There are very few advisors who are worth their fees….

Again, if an advisor can give you better than average returns on the upside or protect losses on the downside, that might be worth paying for.

That means even after fees, you’re going to pocket more than you would have on your own or with other advisers who simply roll the dice and buy you 5 different mutual funds and cross their fingers the market will go up.

Let me end by this.

One of the reasons we do what we do, where we invest into safe, guaranteed investments, and then let the magic of compounding and leverage do the heavy lifting is because we can typically get better than average returns, safely, and so that you can set it and forget it.

The plans we put together have often outperformed Wall Street, with less to no risk, and tax-free, freed up liquidity, better than average income, and you can leave a legacy too.

You don’t need to cause ulcers and anxiety over your money. Keep it safe!

I mean c’mon in this day of technology and easy access to financial markets, banks, and insurance companies, it’s time you put that technology into a plan that will produce for you.

Without fees!

Check it out….

You are welcome to have a strategy session with me, see if it’s a good fit. If not, no worries…

Best part is you won’t pay annual fees, and you likely beat the market too. It’s kind of a win/win.

Well that’s it for this video….

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Hey guys….

Welcome..

So, the other day, my partners and I were talking to an advisor who worked for a big firm.

It was a big firm, been around for well over a century, and this advisor was really interested in doing the right thing for his clients.

He had found us on this Wise Money Tools YouTube channel and wanted to learn more.

What was interesting is this advisor had been in the business for over 15 years.

He would be considered a “seasoned” advisor and had been working with clients in helping them with retirement and other financial objectives.

As we talked to him, and went through our processes and how to build wealth in such a dramatically different way than traditional financial planning….

He was sitting there, and you could see the change in his face….he was nearly dumbfounded.

Almost speechless.

And you could see the wheels spinning in his head.

The questions he was asking himself were written on his face as he sat there perplexed,

wondering how come he’d never heard of this simple, concise, predictable way to build and sustain wealth and income.

It struck me that we were watching the Truman show….

Have you ever seen the Truman show?

It’s about a guy who grew up in a movie set.

Everything, everyone, all that he knew was staged and he was the star, but had no idea he was.

Then one day while sailing he noticed something odd, there was a wall.

He followed the wall, to some stairs and ultimately to a door.

Where was he at?

He was at the back wall of the set that he’d grown up behind.

His entire life was staged and he was about to open the door to a whole new world, the real world if you will, a world that had been hidden from him.

At the door the director finally broke his silence telling him, don’t go out the door, it’s a too big and too scary out there.

He ended up taking a bow and walking out the door.

Its then that those outside the wall, jumped and shouted and were excited he finally escaped the movie set that he grew up in.

That is what it felt like watching this advisor.

He’d been raised, or trained, in a world that was behind the Wall Street wall.

He’s been part of a financial world that is protected by the thousands of advisors that sell mutual funds and investment produced by Wall Street the firms that are part of the “set”

The firms keep all of advisor and their clients behind the wall.

They want you to stay on their set and not try to leave.

Investment advisors are part of the actors that keep the illusion of Wall Street and traditional financial planning behind the wall.

They have convinced their clients, themselves, and each other that there is nothing beyond the products and services they sell.

And sadly, many of them are simply extras, believing in the illusion and not seeing the wall or looking for the door themselves.

They are convinced there is nothing better than you paying fees riding up and down with the stock market, keeping your money, and your future at risk.

They need you and want you to keep throwing your money into any products that wall street has created.

They need you to keep paying fees so that their future and their income is secure, but not yours.

The Wall is what keep you in, the actors and advisors hope you’ll never find the door.

So, this advisor was beside himself, jaw dropped, and confused.

How come he’d never been taught these simple principles about money, safety, and leverage.

He along with the other players in the “Wall Street show” never thought there outside the world they live in.

He had finally opened the door, and when he went out he saw there were many of us who walked out the door years ago.

He sat there and wondered why others, such as his mentors, his trainer and several managers, had never exposed him to these concepts.

We had to break the news to him, that the principals and managers of these firms are kind of like the director.

Some may know, some don’t have a clue, but when they do learn about these strategies, they have to keep it quiet, under wraps, and away from their advisors or they take a chance the advisors will walk out the door.

They could lose their entire business the build and advisors that they trained, and that’s too much of a risk.

Better to keep the advisors and their clients in the dark, safely behind the wall.

Back in the mid 80’s when I started in this business.

I worked for a big firm and I was captive, meaning I could only sell what they allowed me to sell.

I remember picking up the financial planning magazine and seeing articles and advertising for other products and investments that I could not sell.

Many of them I felt were better choices for my clients.

It bothered me, because my purpose, if you will, was always to provide my clients with the best products that I could.

It never dawned on me to just sell stuff, I wanted to do what would help my clients.

How could I be an objective advisor but only could offer my clients what the firm I worked for allowed?

Seemed I was at odds with my firm in behalf of my clients.

I ended up leaving and starting my own firm 18 months into the business. I knew it would be a risk, but I had to have access to the best products for my clients.

So, you could see what was going through this advisor’s mind.

The light come on, he had seen a peak beyond the Wall and saw a whole new world.

A world that had not been open to him before.

A world that his previous firm would prefer he’d never known.

A world that Wall Street had prevented him from seeing.

And now, he was about to walk through the door….

It’s always exciting to see…because I know, back in the day, I was Truman too. I was behind that wall.

Sadly, most advisors, like Truman for most of his life, didn’t even know that they are behind the wall.

Then you have the dyed in the wool advisors, if you ask them about the wall, or ask them about products and services they don’t know about, let alone offer, these guys are the first to tell you, that there is no wall.

They may know, they may not know, but to say there is no wall while basking under the lights of the movie set, is putting the blinders on.

They aren’t searching, they aren’t looking to see if there is something beyond the wall.

I started diligently looking after 2 crashes, a recession, and dot com bust.

I could no longer be an “actor” in this wall street movie. I had to find a better way.

Advisors are still pushing the same old traditional financial planning products even after they realize it’s not working.

Just yesterday listening to a traditional financial advisor on the radio spewing the same thing I’ve heard for 35 years.

The market will recover, hold tight, and he felt no guilt that his clients have lost 20-30% of the wealth.

His answer was, just keep sailing, pay my fees, and pay no attention to that wall right in front of you.

Hopefully, his client aren’t retiring this year, or in the next few years because they just lost a substantial part of their wealth.

Their 401k, their mutual funds and potential income are all down, all while paying fees and hearing, “don’t look around, there is nothing better than what I can offer.”

What they offer you inside this wall is all they have.

There is a wall street wall, they say they’ve got everything you need.

Things are changing. Wall Street is losing its grip on advisors and a few of them are looking around.

Some are finding the door. Some are keeping the blinders on, and firms are trying to keep their advisors from seeing the wall.

We’re already outside and the world is so much better for our clients.

It’s an amazing world outside of the wall…

So, my question to you…..

Are you ready to see what’s outside the wall?

It’s pretty exciting…..

If you’d like to see how your situation can change on the other side of the wall,

If so, click on the time trade link below, set up a time for us to have a strategy session.

Well, that’s it for this video….

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Hi everyone…..

Seems a day hasn’t gone by this path month where someone doesn’t ask me, think its a good time to buy into the stock market now?

I mean a market that dropped 30% seems like it’s a good bargain, right?

Well….let’s do a little homework on that and see what you think.

I like to start with a couple of indicators. I’ve shown these before in previus vidos cause they do a good job of looking at the market from a 30,000 foot view.

One is Shiller PE ratio.

I like this because it’s an inflation adjusted S&P 500 index.

Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio)

I won’t go too deep there, but what we want to do is look at the overall index and have a quick look to see if it’s over or under valued.

The PE ratio as of today is sitting at 26.14.

To understand what that is telling us we need to know a couple of things.

What is the median for this ratio – in other words over the past century, what has the average?

The Mean is 16.7 – just for clarification, the MEAN is what we’d typically call the average, it’s adding up all the numbers and divide by how many numbers you added up.

If you added up 10 random numbers, 5, 12, 17, 2 etc, then added all those numbers together, then divided by 10, you’d get an average of those numbers.

That gives us a MEAN.

So 16.7 is the mean.

Then there is the Median which is 15.77 –

The "median" is the "middle" value in the list of numbers in numerical order, finding the middle number.

So taking those same 10 numbers as an example, put them in numerical order, 2,5,9,12,18 etc…then you find the middle number between them all to get the MEDIAN.

Then you can see that lowest the indicator has ever been was in 1920, at 4.78

And the maximum ratio was hit in 1999 at the peak of the dot com boom and bust at 44.19

So, looking at the current graph again, we see we are still significantly above the mean or the average.

For some perspective, we were about 29 on this indicator before the recent Corona Virus crash.

We dropped 30%, it came back up a bit, and now we’re down about 20% from the highs, and that dropped the indicator about 3 points to its current level of 26.

Another chart to quickly take look at is the GDP to Market Indicator.

There is a lot of story to this chart and we’ll have to get into one day, but the basic idea here is to see if the market is overvalued or undervalued based on GDP.

GDP is gross domestic product which is basically the entire economy. It’s all the production of the whole country.

Since the stock market is essentially based on the economy, we want to see if the market is high or low in value as it relates to GDP.

Bottom line is – This graph suggests we are still paying more for stocks than they will produce.

Our total output is just over 20 trillion, and we are paying over 30 trillion for that output if you were to buy the Total Market Wilshire Index.

This means we are paying 129% of GDP when buying into the Wilshire index.

That quickly tells us that at the current price, even after the 20% drop, still may not be a good value.

As it stands now the rate of return on stocks would be about 0.1% and this includes the 2.7% projected dividends.

When looking at both of these graphs what seem apparent is that even though we had a 30% drop and now hovering at a 20% loss for the year.

And our rate of return of a 10th of 1% is hardly worth the risk.

We seem to still be overvalued.

You know, I noticed this when we hit that 30% mark.

I had read a bunch of FB posts and saw some YT videos saying, wow this is a good time to get in, a 30% drop!

You can see from this 5-year chart how we pretty much jumped off a cliff.

The low for this mini-crash hit on March 20th when the Dow went from over 29,000 down to 19,173.

A 30% whack in just a few weeks.

You might ask, when was the last time the DOW was at this level?

You have to go back to Dec 2, 2016.

In other words, if you bought at the low of the crash, and assuming you bought into the DOW, you would be buying at 2016 prices.

Seem like a good deal, right?

Well might be, who knows, depends on when or if we get back to where we were, and how long it takes to get there.

If we look at the Shiller p/e back then, we were right at about 22 - 24 on the indicator, still high valuation of the mean of 16 and higher than today’s indicator at 20.

In other words, back in 2016 to get 1.00 of earrings people were paying 22-24 dollars.

If there was no growth and you got the 1.00 every year per share, it would take you 22 years to get your money back.

Today, after the market drop its still indicating it would take 20 years to get your money back.

Most investors who are willing to take the risk of the stock market like to get their money back or payback in 7 years or less.

That’s about a 10% rate of return.

Now not all return comes just from the revenues or dividends. It can come from growth too.

Both play an important factor in determining what price a stock is worth paying.

So, one could say that even buying in 2016, wasn’t that great of a bargain either.

In fact, I found it hard back then to find really good values in companies I’m interested in owning.

If you did not buy back then, for the last 4 years you might think how dumb you were for not buying in 2016 as the market continued to rise.

Then in one fell swoop of a germ nearly 4 years of growth was wiped out.

4 years wasted, back to where you were.

We call those compounding periods, and missing out on even one of them can be a huge difference in your wealth.

Well, with a little recovery, we will see where we go from here…..

Today, is April 22nd, the DOW is at 23,445.

The last time we were at these levels was, Oct 27 or 2017.

So, if you had invested back in Oct of 2017, you would have rode a wave of growth up for just over 2 years or about 27 months, and again, you’re right back to where you started.

Now let me get get to the original question.

Is the market a good buy right now?

Based on everything we’ve looked at, and with a projected growth rate of 0.1% it doesn’t seem to poised for great returns.

We were due for some sort of correction anyway, but maybe this virus hasn’t pushed a correction far enough.

Now look, I love a good economy, that last thing I want to do is see a market crash and a depression.

I’m merely pointing out that the market as a whole, as an index, isn’t necessarily a good buy right now.

That doesn’t mean individual stock companies that have suffered a great deal more, might not be good buys.

The question is the recovery time for some of these companies and all the unknows.

For Instance, travel, you’ve got airlines, hotels, and cruise ships all really taking a beating.

Airlines are off 50% or more.

Delta last year at this time was trading at 58 and now it’s at 22 and a half

Is that a good value, a bargain?

It’s all about recovery time.

What we don’t know is how much travel will be affected.

What about the possibly of fewer flights, empty seats, not being able to fill planes to capacity for social distancing?

I mean we have a lot of unknowns.

Royal Caribbean a year ago was 122, now it’s just above 34.

Seems like a bargain.

Until we see the revenues coming in, we have no idea if this is a bargain or if it needs to go down another 30% or more.

What you can’t assume is just because a stock was 122, that it’s a bargain at 34.

It may have been way overpriced at 122, and still could be at 34. We really don’t know until the cruise ships start cruising again.

We are pretty certain that their revenue, earnings, and profit will be down significantly, and likely their debt up.

Will it be months, days, or years, or will they ever recover?

Great question, and until you have the answer, there is no way to evaluate what a good price for this company is.

As a whole if you’re looking at the index, it’s still not a very good value.

With that said, there may be some companies within the index that are looking good, have a clear path to growth and profitability, while others may not rebound as quickly or at all.

If you think you want in, then please, do your homework!

We’re seeing a lot chatter out there and guys trying do some day trading.

But if you’re looking for value, Buffet style, as I like to call it, it’s still not easy.

Buffet’s partner Charlie Munger did a recent interview and he basically said they aren’t doing much of anything right now.

He said, “I think there are lots of troubles coming,

One thing about Buffet and Munger is they like bargains.

They like to buy wonderful companies on sale.

Buffet was a buyer in Airlines a couple of years ago.

Obviously, no one, not even the guru of investing, could have predicted this virus,

However, he’s not selling them, and interestingly enough he’s not buying them either.

If he’s going to hold a position, normally he would add more shares when the price hits his valuation mark.

So, either he may not hold them, or they haven’t hit what he thinks is a good value right now.

Again, they are hard to evaluate until we get going again can see revenue, and profit, the amount debt they will be carrying from this debacle and the kind of numbers that tell us if a company is going to make us any money or not.

I think Buffet will keep them, until or unless the story changes, in other words, if why he bought them is still the story, then he’ll likely keep them and add to them at some point, when there is a way to make money on them again.

Think about this, he has enough money sitting in cash that he could buy the four major airlines right now, but he’s not.

I think he’s waiting this out. Munger said there is still trouble ahead.

The other side to this, is they still might not be a bargain.

Some have calculated that we need another 30-40% drop before we get into bargain territory.

This is what I want to talk about on my next video – becaue just because something is cheap, compared to what it was last month, does not mean it’s a bargain.

So….that’s it for this week….

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Hi everyone, this is Dan Thompson with wise money tools video. Thanks for joining me today. If you recall in our last video, we were talking about another video out there called the index card. It was done by PBS or something like that. Basically it was an index card with a list of 10 items that basically everything you need to know to have financial success or to create a financial plan that would actually work. And the list looked like this. If you recall, number one was saved 10 to 20% of your income. Number two, pay your credit card balance in full every month. Number three, max out your 401k and other retirement savings accounts. Number four, never buy or sell individual stocks. Number five, buy inexpensive index funds or ETFs. Number six, make your financial advisor commit to a fiduciary standard. Number seven, buy a home when you're financially ready. Number eight insurance - make sure you're protected. Number nine, support the social safety net and number 10, Remember the index card. Okay? Well, in the last video, we went through the first five, and we're gonna finish up on these next five. But just as a quick little recap, because I think some of these things are important. Remember, number one was save 10 or 20% of your income. Again, no brainer, got to do it. Number two is also an easier one. Make sure that you pay off your credit cards every single month. That's a very good practice to get into now. Number three, maxing out your 401K and IRAs. That's something that you may want to review. Go back to the last video. It's something that you can't assume or just take for granted that it's a good move to make. Number four and five. We finished up where we left off, don't buy individual stocks and buy ETF. Well! maybe understanding what's really gone on there. We'll change that around just a little bit. Again, you're gonna want to review those steps because there's a lot to unpack there and honest, we could do a whole video on each one of these steps. Okay, but let's go to number six. Number six, make your financial advisor commit to a fiduciary standard. So we really need to understand this for just a second. What he's saying is that there's kind of two sides of the Wall Street world so to speak. There's brokers and financial advisors, and then there are what are called registered investment advisors and they also tout this title called fiduciary. Now the reason he says that you need to insist that your advisor commit to a fiduciary standard is because when you pay a fiduciary. You're supposed to be paying a fee for a service and the advisor is not supposed to have any bias and do what's best for you. Well, In the end, that's really what it means it means the advisor is supposed to put your interest over his or her interests. Okay? So first of all, if you even have this smidgen of a doubt for a single minute. That this person that you're sitting in front of isn't gonna do what's best for you get out of their office, move on. If you're doubting their integrity, and the purpose that you're there to talk with him for. Then you really shouldn't stay even, like I say, even a minute longer, okay? I don't need to slap a title on my desk or on my forehead with this big bold word fiduciary to make me do what's best for my client. So the irony is this, just because they say that they're putting your interests ahead of theirs has no bearing on whether or not you'll make any money. Whether or not you'll lose money, or whether or not the advisor is a complete moron. Moron might be a tough word. But seriously, morons can be fiduciaries. And sadly I see him all the time. I think more important than a title is to find out if the advisor has a clue as to what they're doing. If they have a plan or a strategy, that's not the same old thing that everyone else is doing. Does the advisor or the person you're talking to have a way to protect your money on the downside and make you money on the upside, and better yet even make you money? No matter what the market environment is doing? That's better than a title. So folks, listen to me. A title or a designation does not make that person a genius. A fiduciary, a CFP, a CLU, even a CPA is not an absolute given that they're gonna be smarter then a three year old, they just know how to pass tests. So let me It kind of reminds me of a story back in high school, right? I used to date this girl and hope she's not listening. But she could sit in a class and understand the lecture. She did great on tests. And she was a straight a student. She always did her homework and passed with flying colors. The problem was, she was about a smart as a post I'm gonna to really take some flak on that one. Yeah, let's just say she wasn't the brightest bulb when it came to common sense and real life situations. If you taught her how to do a math problem, and it was given to her well, she'd probably be able to do it. But if she had to figure out things like, you let's take some financial things like a price earnings ratio or how much revenue a company made. Or what does a large manufacturing company need to do to be profitable, you know, things like that we had to kind of think through it. Well, she'd be totally lost. And I see the same thing so often with some of these fiduciaries, or CFP, whatever, they're really good test takers, right? But I wouldn't give them five bucks to manage, right? They just don't seem to understand how to formulate and look for things outside of the box. So just remember, insisting that someone commit to being a fiduciary is not gonna make him or her any better or smarter when implementing a strategy. And finally, if mutual funds are their answers, in other words, you walk in and the answer is to buy five different mutual funds. Well, you really need to look elsewhere because they haven't figured it out yet. Now, I have no problem with fiduciaries don't get me wrong to my partners, our fiduciary they fit that bill and man, they are extremely smart. There are plenty of them out there that are smart. And I can assure you that these guys aren't gonna sell you a basket of mutual funds and then charge you fees for the next 10 or 20 years. As if they have any control over those funds or the markets for that matter. So please get the picture, a title is worthless. Ask them how they're gonna protect and grow your money and see how they answer it. Then ask how much money did your clients lose over the last month, right? And then finally ask how much of my money are you willing to lose? And by the way, if that's even above zero, yeah, again, you might want to walk out. So that's gonna give you a lot more peace of mind and a lot more realistic expectations than a particular title. Now, again, I understand what he's saying. He's saying, find somebody who's gonna do what's in your best interest. Well again, If you got a good solid advisor, they're doing that with or without a title. So let me just talk real quick about fees again, some fees are worth pain. I mean, if they can protect your money on the downside, make you money on the upside, that might be a fee worth pain. If you're just writing the ups when the things are going great and then you'll lose money when it's going down. What are you paying for? You could do that by yourself just investing in indexes or ETFs without paying fees. You know, just this morning, literally driving around. I was listening to a talk show morning talk show. And the guy happened to be talking about fees. Now he was a fee based advisor. And what he was doing is he was getting all over another advisor who is getting paid commissions instead. And he was saying that the Commission guy, all he wants to do is sell you a product, lock your money up for 10 years and take his 6% commission. And I got to thinking, Hmm, well, what does the fee-based guy want? We came right down to it. He wants to sell you his product, lock your money up for 10 years or so, and then get paid a fee every single year that you have your money there. There was really no difference. The only difference was the final product. And I have no problem with somebody arguing whether this product or that product works better, right? But he was such a hypocrite, because he wanted the same thing that he was accusing the other advisor of wanting. He just charges differently. But he still wants the same thing. Then I got to thinking just kind of in my mind real quick, then I had to run back to my office and calculate this. But let's just say the client was gonna invest $100,000 and suppose this guy, the other advisor did get a commission of 6% or $6,000. That's it and then he has to to basically work with that client over the next 10 years without any further compensation. So what is the fee based guy get? Well, most have sliding scales on fees. And the more you put in the lower the fee, but at $100,000 from the scales I've seen in very familiar with. Most advisors are gonna be right about 2% in that range. If he sells you a mutual fund, that you can pretty much count on another percent and half, maybe even more for the fund manager as well. So he's stacking his fees on top of the mutual fund fees that are already gonna be there. All right. Now let's just use the proverbial 10% growth rate, which is not likely to happen after market corrections, taxes, volatility, all that but we're gonna use it anyway. So without fees, and a straight 10% per year if you just had $100,000 got 10% on it. No fees, you'd have about $259,000 in 10 years. Okay? Now if we just take out the advisor fee of 2%, the account would net after fees $216,000. So in other words, this advisor charges the client $43,000 in fees. So you kind of have to ask the question, who's really the fiduciary now? Interestingly enough, the advisor who was paid the commission, he wasn't even paid by the client. In other words, the company that took in the money, paid the advisor, and 100% of the client's money went into the investment. So it wasn't like the client was paying $100,000 and then $6,000 went over to the other advisor. Anyway, the point is the fiduciary. The fee based advisor made 700% more compensation. Then the other advisor that he was accusing of being such a dastardly dude. That's why I call the fee, an annual commission, because that's what exactly what it is. Wall Street just is disguised it to hopefully make you feel all warm and cozy that you'll pay $43,000 out in fees during the same period of time. But fee based advisors have been making a killing over the last number of years, some might deserve it. But seriously, most of them are simply collecting fees and not even managing your money in the first place. They send it off to mutual funds or to an index and then just hope that the markets do well. And that you'll keep paying their fee as because they're gonna call you up every once in a while and say, hey, look how good we're doing. Well, worse than anything, guess what, you probably lost money to these fee based advisors this year. Maybe even as much as 30% and guess what's gonna happen now, you're still gonna pay the fee. So you're down 30% and they're still gonna take out their fees. So when you see that there's one famous commercial out there. It's about fee based advisors. And they have this fancy tagline that says, we only make money when you do. Well that is just hogwash. Their tagline should be, we make money even when you don't, because that's exactly what's happening. They're gonna make their money, they're gonna charge you the fee no matter what. Okay, so that's a lot for one item number six, sorry about that. But it's an important one, because the fleecing of America is happening in many cases due to fees. All right on to number seven. Number seven, buy a home when you are financially ready. Once again, I can buy into this principle good principle. But let me just take it one step further. If everything you make each month goes into your mortgage payment and your living expenses, and you can't save a penny above that, where you bought way too much house. So going back to principle number one that we have to implement today this moment, and that's pay yourself first and at least 10%. So if you can pay yourself 10% and by the house awesome, you did a probably a very, very good financial thing. Don't get house payment poor, be able to comfortably make the house payment and save your 10%. But where we live, I just somehow lucked out that housing turned out to be a really good investment. And since you have to have a roof over your head, it's not a bad idea to build some equity along the way. But also be able to save and save that money outside of your sticks and stones. Don't put all your wealth inside your house. Okay, number eight was a more insurance oriented and it was saying make sure you're protected, again makes common sense good financial sense. And we're not talking about just life insurance here but we're talking about car, home and health insurance. And one thing to consider is to have insurance be there for your catastrophes and your major expenses, not the little stuff. So oftentimes, it's so much better to get high deductibles and low premiums and being able to cover those smaller expenses of $200, $500 even $1,000 that are out of pocket. Seriously, if you'll save the difference between the premiums of a low deductible and a high deductible insurance policy. In other words, go get some quotes. See what car insurance as an example, see how much the premium is each year. For a $1,000 deductible or even a $20,500 deductible, and see how much the premium is for a $250 deductible, and you're gonna see a pretty wide spread of premium. And if you would just take the higher deductible, save the difference, you're gonna put away that 500 or 1000 bucks in no time. And be able to handle those kinds of expenses and unforeseen incidences. Now for medical, if you're not covered by your employer, and you're paying for your own Medicare, medical insurance, there's some group share programs that you might want to look into them. Some are pretty good and some are very inexpensive and it's not technically insurance. It's more groups, but look into it. The other thing you might do is get that deductible up there, maybe 5000 10,000 or even more and once again, if you'll save the difference between the premiums. And you start to save that deductible and get it put aside, you'll be surprised how fast you can put that money away. It is a good idea to have access to your deductible, just in case, right? You may not be there in the first year so, but you'll get there. And the money that you'll save by having high deductibles you tuck it away, you'll have plenty for the deductible down the road. So don't invest that deductible somewhere where you could either lose it or you lose access to it. In other words, an IRA is not a good place to put your insurance deductibles. Interestingly enough though, life insurance that's building high cash value may be a good spot for it. Because not only will that cover your life insurance needs potentially, but access to that cash as well. So when you keep your deductibles high, it's eventually gonna save you more money in the long run. Now, we're almost done because I don't have to spend much time on numbers nine and 10. Number nine is support the social safety net. Now this is just another way of saying, be charitable giving, you know, local charities and churches can often be the first ones on the scene to help others out in your community. In the book, The Richest Man in Babylon, great book, if you haven't read it, you gotta go read it. The first two principles are pay yourself first, at least 10%. And then give away 10% that could be to a church or a charity or a school or just anywhere where you're helping out others. And I think being charitable is a great way to give back. But it makes you not only feel good, but it's a win-win for the charities and the communities and being able to help others as well. Sadly, someone seems to always be hitting a rough patch, and hopefully you can be there with some of your funds to help them out when you can. Number 10 Lastly, remember the index card, right? So I think this is kind of a play on Warren Buffett's two rules. Warren Buffett's rules are this rule number one, don't lose money. Rule number two, don't forget rule number one. And so I think number 10 is kind of doing the same thing. It's saying the idea is, if you're a believer in these concepts, then don't forget them, use them, put them into your financial strategies and implement. So at the end here, let me say, there are some great strategies that you can implement that will adhere to the important aspects of these principles or these 10 rules, if you will. Overcome the challenges of the ones that don't make a lot of sense. Make some adjustments on those. But keep your money growing and keep it safe and even keep it tax free. If you do things right. You might be genuinely surprised when you see what safe money strategies can do. When you implement Einstein's formula of y=a(1+r)x exponentially growing or squared, right? The squared or the exponential growth is what so many people are missing. Even we missed it for years. We had to build it from scratch. And I think when you start looking outside the box and how other people are generating their wealth, you can figure out some of these things. And what I love to do is figure out how are people generating wealth or return and doing it with the least amount of risk? Well, if you want to see how that might fit into your situation, then just click on the time trade link below and we'll have a quick strategy session. Always feel free to comment below. If you have any questions, shoot them to questions at wise money tools.com. I'll answer them as quick as I can. And for heaven's sakes, don't forget to subscribe. Don't want to miss a video. Always good to have you with me. Thanks for joining me today. Until next time, take care.

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Hi everyone, this is Dan Thompson with wise money tools. Welcome to our video slash podcast today. You know, I always like to look around and see what's going on out there in YouTube land. And I saw kind of an interesting video. It was a I believe it was a PBS special on what is called the index card method. And what it did is essentially was all the financial advice you'll ever need on 1 index card. And there were basically 10 steps that you would write on this index card. And supposedly where the idea was that if you achieve these 10 steps, that's all the financial planning you would need. So what I wanted to do is kind of review those steps and see how they stack up so to speak. Some of them are good, some of them makes sense for sure. Others need to be kind of discussed. So here's the list. All right. Number 1 was saved 10 to 20% of your income. Number 2, pay your credit card balance in full every single month. Number 3, max out your 401k and other retirement savings accounts. Number 4, never buy or sell individual stocks. Number 5, buy inexpensive index funds or ETF. Number 6, make sure your financial advisor commits to a fiduciary standard. Number 7, buy a home when you're financially ready. Number 8 was insurance make sure you are protected. Number 9, support the social safety net and number 10, remember the index card. Okay, so big list I know. Again, some of these things make sense, but let's just do a quick review. I don't want to go too much detail on all of them, let's just talk about this list just really quickly. Most of it's fine, obviously. But there are some things to be cautious of. So number 1, save 10 to 20% of your income. Okay, good one completely agree no-brainer. We've talked about it 100 times, right? Look, if you don't figure out a way to save some money, unless you expect some kind of inheritance. You're always gonna struggle financially, you've got to pay yourself first. And remember, that's part of the wealth equation, y=a(1+r)x, simple equation. We'll talk about that in just a second. But when that paycheck comes in, be selfish. Pay yourself first. After all, you're the one doing all the work, you deserve something at the end of the day. So number two is pay your credit card balance in full every single month. Again, great habit to get into a no-brainer. I personally like to run things through my credit cards for all the miles, bonuses, rewards perks you get by running them through the credit card first. But I never carry a balance at the end of the month. And I've gone years, literally years without having to pay for a meal. Because one of the things I do is I convert my cash back into restaurant gift cards and also Amazon cash. Now I know there's probably better things to do with it. But it's kind of nice to just never have to pay for a restaurant meal when you go out. I've also had free airfare or upgrades to first class hotels. And as I said, I use them for Amazon cash. So lots of Amazon purchases over the years too. Now the disaster with credit cards is if you carry a balance, then you're the one paying for all the rewards and airfare miles and all the different restaurants that others who don't pay interest are getting. Those that pay interest, help pay the rewards for those that don't. Not to mention, if you pay the minimum credit cards, they're literally designed to almost never pay them off. So get them paid off, then don't use them. If you can't pay them off at the end of the month. There's really hardly anything worth having that you can't do without if you can't pay for it and have the balance of zero at the end of the month. Okay, number three was max out your 401k and other retirement savings accounts. Now, here's where me and this guy may part ways just a little bit. I understand that idea. It's saving for retirement and I'm totally on board with that. However, deferring taxes now, only to have to pay them later may not be the most prudent thing to do. So let me present it to you this way. How about if I lend you $10,000 today? Now don't worry about paying you back right now. And in 10 or 20 years, you can start to pay me back. But it's at that time that I'll tell you how much interest I'm gonna charge you. Sound like a fair deal? Well, that's really what tax deferral is. It's the idea that today, you know, your tax rate. But you're making a deal with the government, that at retirement, you're gonna be happy to pay the tax rate that the government decides on down the road. Now, with all this talk about more social programs, more benefits for people, that $2 trillion that we just racked up based on this Coronavirus. And maybe another trillion or two, do you really think your tax brackets gonna go down in the next 10, 15, 20 years. Another side to that is so many people are actually in the lowest tax bracket they're gonna be in. Let me give you an example. I was talking with a client the other day, son just getting a really good job just out of college gonna be making some good Money. But he's probably in the lowest tax bracket he'll ever be in. Yet, they want him to already start to participate in the 401k, which means he's gonna defer paying tax at, let's say, 15% to ultimately pay tax down the road it 18, 20, 25, 30, 40%, who knows what it's gonna be. The deal is, he's gonna know what his tax bracket is in 40 years. And that may or may not be a good deal for him down the road, statistically and knowing what's going on, it's probably not gonna be a good deal. He's probably better off right now getting that tax out of the way, then storing it in a place where he may never be taxed again. Now, the other side of that is the where, in other words, where the funds going. When you invest into a 401k IRA, so on and so forth with most financial advisors or with most retirement plans at companies. They're typically going into mutual funds. Now what that means is you're gonna be taking all the risk, it also means that you're gonna be paying all the fees. Now on the low side, it's estimated that 30% to as much as 50% of all you earn in those 401Ks are gonna go to fees and taxes. You know back in 2008 when that market crashed, we kind of affectionately or jokingly called 401K's 201K's because they were basically cut in half. If you've got a retirement plan and it's in mutual funds, good chance that you just lost 30% maybe even 40% of your market value just in the last month due to this Coronavirus. Hopefully you weren't retiring this month or this year because your potential income just got decimated. So although I understand his motive, which is safe, safe, safe for retirement, good thing, nothing wrong with that. The options he gives are really not all that complete. We need to hear much more of the story and find out is does it make sense to be putting money to 401Ks and IRAs and other places where I'm deferring attacks. Hoping the government's gonna treat me fairly down the road. There may be a much better place to store those funds and keep those funds tax advantaged too. Okay, number four. Number four is never buy or sell individual stocks. Now, again, I know where he's coming from, and I get it. Most people don't take the time to become good investors. And as a result, they're really speculators. And they do what I call the they get the barbershop advice then fact you know, if you've been watching me for a while, my last few videos have been about Facebook, financial advisors, right? And you can't just hear something in the barber shop or read some I'm Facebook and think you're a good investment or investor just because you jump on that. Now, because most people don't want to be speculators. What they do is use a very common tool. And it's used by financial advisors every single day. And they call it diversification. Why? Because they don't know what's gonna happen. So instead of buying two or three or five individual stocks, they end up buying bunches of stocks in mutual funds or indexes. And that also kind of ties into number five, number four, and five kind of can be talked about together. So instead of buying individual stocks, number five says, buy inexpensive index funds or ETFs. This way you own 1000 or 2000 different companies with the idea that not all of them will go out of business at the same time. Or if you buy the index of ETFs diversification supposedly keeps you safe and unharmed in market crashes. Now, quick question, do you have mutual funds? Index funds? ETFs? Did you lose any money over the last month or so? Now, wasn't diversification supposed to protect you from these losses? See, this is what really frustrates me they use this term diversification make you feel all warm and fuzzy. But in reality, if markets go against you diversification in the method that they use, it just doesn't work. So why did they do just as bad? Why is it that you're likely down 30% even though you did diversification, in other words, diversification didn't help you that much did it. And I think Warren Buffett said it best when he was asked about diversification, because he doesn't diversify all that much. And if you didn't have so much money to work with, you'd probably diversify even less than he is today. But he essentially said, diversification is for those that don't know what they're doing. So instead of learning and educating themselves, what they do is they toss money into funds and indexes and then cross their fingers. You don't take the time to learn about the company, how the management does their thing, the numbers, the P/E ratios, the revenue and all those expenses and the taxes and the debt. And by doing that, figuring out, hey, maybe this is a good company to own long term. Now, I understand barring your willingness to become a good investor. It's probably best to stick with the indexes. Now we're gonna talk about this in just a second down the on one of the other principles. But there's really no reason to pay an advisor to buy mutual funds that won't perform any better or worse than the index and by the time you pay the advisor fee, things are even worse. Which brings me to number six, but guess what I've gone over time. So we're gonna have to do number six through 10 on the next video. I don't want you to miss it, so make sure you subscribe. In the meantime, these five principles that we've talked about if you have any questions about them or thoughts about them, put your comments below any questions, shoot them to questions at wise money tools.com and I'll answer them just as quick as I can. And if you want to talk more about your specific situation, click on the time trade link below quick strategy session. And see what's going on in your financial world. Well, that's it great to have you with me on this video. I look forward to talking about number 6 through 10 on the next one. Till then, take care.

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Hi everyone, this is Dan Thompson. Welcome to another wise money tools video. Glad you could join me today. You know, in the last video, we were talking about some comments on a post put on Facebook. And the advice or non advice that was given after that. And just as I finished up those videos, I started reading through it again and there were some more comments. And I just thought, Man, I've really got to talk about this. Now, for those who don't recall, maybe didn't see the last video, you can go back and watch it. What happened was, I think a second level person in my facebook group had this question. And the question was, for those of you who have stocks and bonds, do you use an investment advisor or self-invest in an index? He goes on to say, we have an account with Stiefel, but I'm not overly impressed with the performance we've seen and the fees that they charge. Any recommendations anyway, then the recommendation started coming. A lot of that I call barbershop advice. And I'm not trying to disparage barbers. It's just that's kind of the proverbial thing, you know, Oh, I got the stock tip from my barber. Anyway, go back and revisit last week's video if you want to hear some of the other comments and what was said there? Well, the next couple of comments were really telling one of them read like this. He said, I managed my own investments in Robin Hood. You can do fee free trading there. If you're interested let me know I'll give you a referral code. That gives you both you and me some free stock. Okay. Well, Robin Hood, actually it is a pretty good place to trade. It's a pretty good place to trade here that again, it's a pretty good place to trade. It's not a very good place to learn how to trade or to learn how to invest is not very many places that can teach you that. I think the guy who had the original post was trying to either turn it all over to someone else, or learn how to do it himself. If I can hear what he's saying, because he says, back to this guy he says, Well, I already run Robinhood. So in other words, he's already got the app. But I don't trust myself to run my entire portfolio yet on my own. Are you actively trading or park on some index funds? Now, not quite sure what he was saying. I think I get what he was asking there. But what's interesting is he's kind of self-aware. He knows he's just pushing some keys and some buttons and buying stocks. But he has no confidence that he's doing it right or even knowing what he's doing, and so he's reaching out to somebody, you know, what do you guys do? How do you guys know what you're doing? Sadly, not everyone's all that self-aware. They think if they pull the trigger on some stock, and it does well, now they're expert traders. And again, we saw this so much through the 90s and the early 2000s. Because it was just hard not to do well, if you push that button. So this guy's answer to him was priceless. And it's exactly to my point. He says, basically, I do a little of both, mostly indexes for my parked stuff. But I do invest in companies that come and go in value. That come and go in value. That's the key word here. For example, I had some Tesla shares I bought during the dip, and then sold during that insane not logical price jumped last month. Okay, so kind of laugh at that because we got to unpack this answer. So first off buying indexes, I get it. For many, this is where they should probably be investing, rather than being in managed mutual funds and paying high fees. However, this really isn't investing, it's more speculating. It's hoping the market will continue to go up. It's kind of betting on America, which again, is all good. But it's not really investing and investing is more when you understand what you're doing, why you're doing and you're doing it with purpose. See, these guys really have no reason to be investing, no logical explanation then other than, you know, isn't just what you're supposed to do with your money. Right? So now, by the way, what I think he means by Park stuff, I think he means his long term money, or maybe money that he doesn't necessarily want to put out there to lose. Even though that hasn't worked out so well in some of these major recessions but I'd be curious what long term is to to this person? I always wonder if these people have been taught or even thought about compounding periods. And the effect negative compounding has on their losses. Well, then the part that really got to me was his comment about Tesla. Now, I personally like Tesla as a company, I love the technology. I love the innovation. I love the cutting edge. It's a fun company to watch. However, in nearly any evaluation model that you use that you can find out there, you can think that Tesla is ever what is considered a value play or a value stock. Last year alone, it lost $5 a share, which means it has no earnings, right has no dividends, has no revenue, and it sells for $800 a share at least at this current time of this video. So you pay $800 a share to lose $5 and for some reason that stock keeps going up and up and up. Okay? For Tesla, I kind of get it. It's all on the hope that they're gonna do something incredible. Discover something, they're gonna explode their profits and their earnings and some days that those, the revenue is gonna catch up to the stock price. At least that's the hope. And that can take years and years, if not decades, who knows? They probably can happen maybe will happen. But for now, you can't give me an evaluation model that shows Tesla is in any way shape or form of value buy. So just by this guy's comment, I realize he's technically not a value investor. Anyway, he says I buy companies that come and go in and out of value. And then it goes on and buys Tesla on the depth. Alright. Tesla on dip is more of a technical way of trading, but it's certainly not value. So and again, be I hate to reiterate this, but Tesla has no intrinsic value. So how did he value it, it's really hard to value a company that has no earnings. In fact, the value stock or the value stocks that are out there, it's where their earnings are better than their current stock price is selling for. So in other words, you have a really good chance of getting your money back out of that stock in a very short period of time because of the earnings. The truth is, all this guy did was roll the dice on a technical dip. And now he thinks he's a value investor. So as a comparison, you got to look at a true value investor and even Buffett doesn't necessarily like this but Buffett is really a value investor. He's not buying on dips of value investors when you buy a stock, that may be worth $50 a share, but you're buying at $25 a share. And it has enough earnings to get all your money back in say 7 to 10 year period of time, just through it's earnings. That's just kind of a cursory overview of what value is. And again, Tesla was not value. And that's why I say oftentimes, this is barber shop advice. Okay, then he ends with this last comment. He says, not logical price jump last month, well, not logical. I'm not sure what is logical about Tesla right now, but it's certainly nothing logical in the value arena. So in addition, one thing to know that when Buffett wants to buy a company, he wants to buy it so that he never has to sell it. In fact, he says the best time to sell is never but for different reasons than a typical Wall Street advisor would have. See a Wall Street adviser basically says not to sell with their fingers crossed, hoping that the markets gonna come back. Buffett doesn't sell because he knows the company so intimately. He knows the management, the revenues, the products they build, the cash flow, the balance sheets, I mean, knows everything about that company before he buys it. And if he's gonna buy one stock, he treats it as if he's gonna buy the whole company. And he won't buy a company for one day, if he doesn't think he can hold it for 10 years. That's really how you become a wonderful investor. He's virtually assured that unless something significantly changes within the company, he's gonna make money. And that's why he wants to just hold on to that company forever. Why not keep holding companies that are making your money. And again, the only time he would sell is if the story changes dramatically, and it's no longer the same company that he studied, understood and originally bought. The guy who bought Tesla, he was speculating. He was rolling the dice got lucky. And now he's able to give financial advice to his friends. He came out, okay, because that's really the kind of market we're in. We're in that greater fool market, the greater fool seems to be just around the corner. And you don't have to do much homework right now. You can listen to your barber, and maybe you'll do okay. The point is, if you're not going to learn to invest, then please don't take advice from Facebook comments. I guess Facebook is becoming the new barber shop where advice is free and worth about that much too. I'd love to see anybody that's interested become great investors. But if you don't want to take the time and educate yourself, there are ways to get compounded returns without the worry, without the risk, without the heartburn, without spending hours and hours looking at spreadsheets. In fact, with the accelerated leveraging strategies and having safe money, you can oftentimes do better than risk investments and not miss out on compounding. And if you do it right, you'll even have some tax advantages. Well, that's it for this Facebook post. It was sure interesting to say the least. If you have any comments, please make sure you put them below if you have any questions, you want to shoot them to questions at wise money tools.com, answer them just as quick as I can. Don't forget to subscribe, and don't miss a video. Got a lot of good stuff coming up. If you ever want to have a conversation about your situation. You can also click on the time trade link below and we can talk about what's going on in your life. Well that's it for this video. Until next time, take care.

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Hey everyone, Dan Thompson with wise money tools. Glad you could join me this week, we're gonna continue our conversation where we left off with this Facebook post. Because this has been really interesting to see all the comments that came after this one little post. Okay, so the next comment was kind of interesting. This guy said, I do use a financial advisor. And I can tell you why and the risk. PM me, you know, private message me. The reason it was interesting is maybe he can tell you why he's using a financial advisor. But how do you quantify the risk this financial advisors willing to take. I mean, does this he mean this advisor is taking too much risk, not enough risk. I wasn't sure what the comment meant. I really like to hear this conversation. If he does PM him, I always ask people who call me wondering about their advisor? And if he's really any good or not. So I asked them, Well, have you ever asked your advisor? How much of my money are you willing to lose? Most people haven't asked that question. And of course, they have no idea how much their advisors willing to lose. So unless this advisor tells them exactly how much he's willing to lose, this is unquantifiable. And if the advisor is willing to tell you how much money they're willing to lose of your money, maybe that's not the right adviser at all. I mean, I want to tell someone that I'm not willing to lose any of their money. And sadly it's just a dream if you're gonna put your money at risk that at some point, you're not gonna see some losses. All right, then the next comment said talk to so and so. Now they name somebody but I took out their name don't want to get anybody into trouble. Anyway he says talk to so and so. He's got a combo that's working really well. And we just used etrade. I think, by combo, he meant he does some stuff on his own. And he uses a financial advisor as well, once again, I point out, he's doing really well compared to what a bank savings account. Is he doing? Well, compared to Warren Buffett, what is well, so to speak. And here's the here's the other thing. And the way I understood this is people look at their statements right now. And I just want you to understand that money is not your money yet. Unless you're thinking of pulling that out, taking it in locking in those profits. That's not your money. Those values are a snapshot in time. You may think that your money but unless again, you're willing to pull it out chances are pretty high. You're gonna write it down as well. That's just what most people do. So you really don't get to count your money until it's out of the market in a safe place, then you can say, all right, this is my pile of money. And I wonder if this advisor combo is ever gonna tell him when to get out. Most advisors don't. It's really interesting in my 35 years, I don't ever hear about advisors telling their clients to get out of the market. Now one of the reasons why it's counterproductive to the advisors goals. Now, what are the advisors goals, to keep as much money under management charging fees as possible? So there's always a reason to stay in from the advisors perspective. If a markets dropping, they're always saying, Hey, you got to stay in. You don't want to lock in these losses. This is gonna come back. If a markets going up. It's Hey, you got to stay in. You don't want to miss out on these returns and we're in this great economy. Here is never a good time to sell on Wall Street. You know, I remember the.com boom very, very well, late 1990s. Everyone was a stock genius. People were buying up internet stocks at a 1000 or more times earnings. That means for a company that would earn $1 people were willing to pay $1,000 for that dollar. And sadly, there were so many of these internet companies who didn't even have earnings and they were being bid up just ridiculous. I remember Yahoo at the time, probably worth about $3 billion. But people were buying it up at $34 billion valuations. That'd be like, you go in to buy a house that's worth $100,000. But you're paying 1.1 million for it, hoping one day it's gonna be worth more. That's just how insane things were at the time. We called it the greater fool theory. If you bought it today. You were just hoping that a greater fool would buy it from you tomorrow. There really were no valuations that made sense. There was no concern for earnings, no understanding of economics. I mean, it was the wild wild Wall street West. And then it happened again a few years later in a way. And that downturn, we saw a lot of people lose 50% or more in just a really short period of time. Now, I don't think we're there quite yet. But there are a lot of advisors thinking that they're kind of King of the hill because the markets been so good to them. And they look like geniuses. But what is geniuses like Warren Buffett doing right now? Well, as of December 2019, he's sitting on $128 billion in cash. Is he a big buyer in this market? No. Do we think he's stupid sitting there in cash? No. I mean, everyone else is at least buying the index, shouldn't he? Well, he's a very, very patient and disciplined investor. He's gonna wait till this market turns, then he's gonna just buy like crazy when things are on sell. And he's gonna do what he says he's gonna buy $10 bills for $5. So, he says to be greedy when others are fearful and fearful when others are greedy right now, I don't sense much fear in the marketplace. Will the general population and these Facebook commenters wait it out? Probably not. They're gonna get aggressive. They're gonna start buying, they're gonna take each other's advice and then one day, you know, kaboom, it's gonna blow up. And they're probably gonna panic and then, you know, sit there and miss out on 1 or 2 compounding periods, which is so important in life. Well, here's the next comment. He says, I use a financial specialist and he partners with my company and gives great non-biased advice. Also, not fee based. And then he goes on he says our company does not manufacture their own funds. So I'm guessing this is some sort of a financial company, and he can utilize most major fund companies. So let me know if you'd like to get a second opinion on what you have in place. It never hurts. Well, first off, I have no idea what a financial specialist is. It's either, you know, some made up term, or this guy is really got his clients fooled into thinking he's something special. Anyway, he says he also partners with many companies and gives great non-biased advice. So one of the first things I think of is what in the world is non-biased advice? And what is great advice compared to what. Right. Now we're all biased. It's kind of human nature to be biased towards something. The fact that this guy is giving mutual fund advice and selling mutual funds tells me he's probably biased in favor of funds over individual stocks or gold or real estate. Right. Now, I don't care if you're biased. Just tell me why. And give me some good reasons why I should listen to you. And maybe I'll be biased with you as well. I remember a few years ago, one of the comments on of my videos can't remember what the video is about, but I do remember the guy says, Hey, don't listen to this guy. He's biased. And I immediately answered, well, of course, I'm biased. Why do you think I did this video? Right? I'm biased toward whatever this video was. But for the most part, I'm biased towards safe money and compounding. I have a biased against advisor fees that have no real value. So yeah, it's okay to be biased. Biased is not the issue. Ignorance is the issue. I like to hear ideas and I'm open to most things. However, after 35 years of doing this, I've kind of heard about Lot of the garbage that doesn't work that's still being sold today. So yeah, I do get a little bit biased. And then he went on to say also not fee based. Well, if his advice isn't worth the fees, then yeah, you definitely want to, you know, avoid that kind of a thing. Now, I'm not a big fan of fees, but if someone can get me Buffett like returns. And they're worth paying a fee to, that's a little bit different story, but your traditional advisor who's just buying mutual funds, and doesn't even understand the buffet way, probably not worth paying the fees. I'd be interested in his level of knowledge of how to invest again, if he's investing buffet style, it might be worth, you know, paying a fee. Sadly, again, most advisors aren't worth really the fee that you're paying them and they don't know much more about investing, then a lot of you do. Studies have shown that fees can rob you from as much as 30% of your total return. You know, if you assume a 2% total management fee and 8% returns. So about 30% of your total returns. Very, very expensive. Well, it sounds like this guy in this comment simply picks mutual funds for you. And if that's the case, we really don't want to be paying fees. He does say that this guy gets to pick from all the major fund companies. Well, that's got to be a winner right? At wrong. You can find so many reasons why the major fund companies lag even an index. Well, this is kind of what I end up calling barber shop advice, not trying to, you know, pick on barbers but that's kind of where you know hear about the advice coming from the barber shop, it can be pretty much worthless. Then he says at the end, that he can be there for a second opinion. Well, look, as I said this before, and I'll say it again, you need to become the expert. If you're in interested in investing, and stocks and all these kinds of real estate, whatever it is, you need to understand it. You need to understand money and investing and valuations and everything that's gonna to help you become a great investor. If you're not willing to do that, if you're not willing to put in the time, which by the way, it's not like it's that hard. But it does take some time and effort and energy, and you really need to have a desire. It's just not something that you can just learn overnight. But if you're not gonna do that, then you're going to be susceptible to this barber shop advice. Which is worth about as much as the hair on the floor. Right. So then the comments started to go into different brokerage firms that they use and up and comer brokerage companies like Robin Hood and then one. And you know, those are good firms, but they're good firms in actually executing the trades, but they're not unnecessarily good. Helping you learn how to make good investment decisions and becoming a great investor. They're not gonna find you a strategy that works. They're just gonna help you execute trades.And this is why I go back to Einstein's wealth equation because it works and we can implement it and it's easy to implement. And it's something that we can help our clients implement easily and you know, the equation y=(1+r)x, pay yourself first, start today. Don't lose money, let it compound and leverage for exponential growth. It's a pretty simple equation. And since we're on the topic of stocks, don't lose money should be the focus. That is probably the biggest wealth killer is when you lose money, you lose compounding, you lose time. You don't have to be a market or a stock genius. You don't have to tie markets. You don't have to take any advice from the barbershop crew. Because it's not gonna get you there in the long run anyway, you've got to be smart be deliberate be compounding be safe with your money and wealth on naturally follow. Okay, so that's it for this video. If you have any questions, shoot them to questions at wise money tools.com, we'll answer them just as quick as I can. Also make a comment below. Don't forget to subscribe. And if you want to talk about this stuff more in detail in your specific situation, just click on the time trade link below and we can have a quick conversation. That's it for this week. Until next time, take care.

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Well! Hi everyone, this is Dan Thompson. Welcome to another wise money tools video. So we've been right in the thick of this virus, this Coronavirus scare over the last few weeks. And boy has this market taken quite a tumble on February 20th, literally just a month from today. So today's March 20th. So a month ago, the Dow kind of peaked out it was 29,000 and some change 29,300. And then just fast forward, you know, exactly almost 30 days, we're all the way down to 20,100 so about a 9000 point drop. And we have seen it worse it was actually had dropped even more so. Than that we were in the 19,000 even I think he got into the 18,000 so it was it got ugly fast. So to kind of put it in perspective, there's some different definitions in market cycles, a pullback is considered somewhere between a 5 to 9.9% drop. So if the market drops 5, 6, 7 percent, that's considered a pullback. Once the market hits 10%, that's considered a correction. So we hit correction territory, like within just a few days. Then a bear market is considered anytime a market drops 20% or more. And of course, we've hit that. Now a recession, it's more or less a broader term, it's pretty much identified by two quarters of negative growth. Now, we're most likely gonna go into some sort of recession territory with this virus, slowing the economy or definitely down for this quarter. We'll just see how far this is gonna go. So we've pretty much dropped 30%, which obviously puts us into bear market territory. And we'll see if we get to quarters to see if that's gonna push us into recession territory. But what's happened is we've essentially wiped out five years of market growth. I mean, everything that everybody got in the last five years is pretty much gone. I remember doing a video, I think it was late last summer. And what I said was, there's a lot of people getting their statements, they're feeling really good about it. They're calculating how much money that they have. And I remember saying that they think it's their money. However, the only way it would actually be their money is if they were to sell out and protect their profits. Right. Then I went on to say that most people are not gonna keep their profits. They're typically gonna ride the market down whenever that happens and lose a lot of their gains. So when people were looking at their statements late last summer, and feeling really good about how much money they had. You know, acquired over the last number of years, I remember thinking, Oh, man, these people think this is, you know, this is their money, so to speak. Well, who knew that this virus was right around the corner. And that, you know, in a surprising turn of events, literally five years of gain would be wiped out in less than about three weeks. However, the behavior is the same with every correction, every recession, every bear market, most people just ride it up and down. And it turns out to be more like a treadmill than an uphill climb. You know, when you look at Wall Street, it's really driven by two different forces. And those forces are greed and fear. Well, we've certainly seen fear replace greed in the last few weeks. And as I've mentioned before, the stock market just wants predictability. Whenever there's uncertainty, fear is gonna set in. And for the most part, a pullback of 10% is fairly normal in, you know, in a year or twos period of time. There's always gonna be fluctuation and profit taking change in some economic situations. Those are normal business cycles. But let me emphasize again, that losses have a substantial negative impact on your money. You know, you're always hearing advisor saying, the market always recovers. You hear the radio guy say, the markets gonna recover? Well, of course it does. No one's gonna argue that, but what they neglect to tell you is how devastating the loss can be, because it's a loss of time. Let me give you an example. And I've used this before I just seem like I have to say this almost every week. But let's just use this proverbial 10% return that every advisor seems to throw out there. That if you stay in the market long enough that you're gonna average 10%. All right? That means that your money is gonna double roughly every seven, seven and a half years rule using the rule of 72. Rule of 72 basically says if I divide 10% into 72, I should be doubling my money every 7.2 years. Now, that's not all that accurate, but it's pretty close. And as I've discussed before, in a working lifetime of a typical lifespan. We start working, you know, in our careers that roughly age 25 and we're gonna work till 65, 66, 67. So we're basically gonna have 6 compounding cycles. So let's look at it from a guy that 25 years old, he has $10,000 and he's gonna leave it alone until he's age 65. And again, we're gonna use 10% as our annual rate of return. So it's gonna look something like this, in the first cycle $10,000 to $20,000, 2nd cycle $20,000 to $40,000, then $40,000 to $80,000, $80,000 to $160,000. In the fifth cycle, we go from $160,000 to $320,000. And then the most important, the most critical cycle of all is cycle number six, which is $320,000 to $640,000. Reason why I say that's the most critical is because as you get into those last two cycles. Especially, they're really creating some powerful, some capital some net worth. I mean, going from $320,000 to $640,000 is huge and can make a big difference in your retirement. So that's how the cycles work. Now, here's the problem with market cycles. Again, I think everyone will agree that the markets gonna recover always have and presumably always will. But at what cost to you see if you have six compounding cycles or basically 45 years for your money to grow? If we look at this chart, you can see what's happened in the past. And these are, this is going back to 1929. Now, we all know about the stock market crash at 29. Right? Well, it took from 1929 to 1959 for the market to quote-unquote recover. So if you had $1,000 in 1929, it took till almost 1959 to have your $1,000 back or to quote-unquote, recover. That is 4 lost compounding cycles. Now think about that. Losing four out of six compounding cycles in your lifetime. That means in the same 45 years that we're looking at, you only got to double twice. So you went from 10,000 to 20,000, and then 20,000 to 40,000. And that was it. You missed out on the other four compounding cycles that really would have made a difference in your lifestyle. Now, after 1959, things went along pretty well. We had a pretty decent decade, and then we hit the 70s. And between oil embargoes, inflation, high interest rates, some of the worst economies and that we've had, there was another 3.5 last compounding cycles. So from the 1970s, through most of the 80s, it was just recovery time. And yes, the 80s were good years. But for those who had already saved and invested in the 70s, they were pretty much just recovery years. Now I started as a financial advisor in 1986. And back then, because the market had done so well from like, say 1980 on the Wall Street and the advisors were projecting 20% returns going forward. Because things were like I say they kind of were on fire, things were doing great. Then after the 80s came, 90s did pretty good. And then we had the.com boom and bust and then y2k. And there we lost another 1.2 to 1.5, you know, compounding cycles. In fact, we call 2000 to 2010, the last decade, basically where there was no money made in the market. So you can see my point here, it's not that the markets won't recover. It's that you lose time, you lose compounding cycles and that is time that you can never get back. Now we've had a drop of 30% as my pointed out, painfully. What we don't know is how many months or years will it take for us to get back to 29,000 and some change. And the reason for that is because we don't know how long this virus gonna last and so on and so forth. We do have a pretty strong economy waiting to kind of get going again, so we might recover fairly quickly. But keep in mind that when a market drops 30% if it goes back up 30% that's not a full recovery. Let me give an example. Let's say I have $1,000 and I lose 30%. That takes me down to $700. Right. Now, if I'm at 700, and the market goes up 30% I'm only at 910. So it actually requires just under 43% return to get back to my original thousand. So a 30% loss requires a 43% gain to get back to where we were. So now that we're down here, let's just say at 20,000 in the Dow. We need a 43% gain from this point to get back to where we were. So in that period of time that this recovery is happening, I not only lose out on compounding periods. But the markets have to do much better to get me back to where I was. Now, I love a strong economy. Like I was saying, I hope this recovers quickly. I don't want to see us go five or seven years just to get back to where we were. But what I really want to emphasize to you is a very simple principle. I call it the ABC principle. ABC stands for "Always Be Compounding". Don't miss out on compounding cycles and certainly not 3 or 4 cycles. This is why way too many people end up broke or near broke during retirement. They just missed out on way too many cycles. And if you're within 1 to 2 cycles of retirement, basically 7 to 14 years, let's just say, you can't waste those. You need to do something different if you think that these cycles are gonna affect your future retirement. If you're completely relying on the market and you're 1 or 2 cycles away from retirement, you might need to be doing something different. You know, Einstein said it perfectly. You've heard it all before. It's the definition of insanity. And that's doing the same thing over and over and expecting a different result. Well, I've been doing this for 35 years, 36 years and sadly, everyone keeps doing the same thing over and over and hoping this time it's gonna work. You know, if your advisors been doing this for less than 10 years. He or she probably has no idea what it's like to have a market crash or to go through a cycle. I mean, the last 10 years have been pretty good. They think this is just how markets work and that markets always go up. If this is their first time, they've had to deal with this, they're in somewhat of a panic mode. And all they can do is repeat the mantra. Markets are always gonna recover, you're gonna be just fine. They just forget to tell you, yeah, you might miss out on 1 or 2 compounding cycles. And that can be devastating. Unfortunately, I've been through way too many of these, which is why you need to never miss a compounding cycle. Again, ABC pretty simple. Always Be Compounding. You know, again, I hope this corrects quickly. I'm not a doom and gloomer, I like to grow money just like the next guy. However, we've had to develop a process that lets you compound keeps your money protected at the same time. Because I went through too many cycles and I don't want to do that ever again. Well! That's it for this video. Feel free to reach out and ask any questions that you have. I'll try to answer them as quick as I can. If you'd like to schedule a time to chat, just click on the time trade link below. We'll schedule a time to have a few minutes, see what it's like in your situation. And see if you're in panic mode right now and what you could potentially do about it. Feel free to make a comment also below and don't forget to subscribe, never miss a video, never miss a podcast. And that's it. I will talk to you later. Take care.

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Dan Thompson