Traditional investment advice states take some of your money and invest it in the stock market in a properly diversified portfolio and you will be able to retire. However today more and more Americans are struggling with this approach as they start to reach the age that they need to draw on this money, and are having to work longer. The effect of 3% in fees on a mutual fund’s performance over the course of your life amount to around 60% of the potential gain due to the effect of compounding.
There is another path that can enable you to escape the rate race in as little as 10 years.
The 3 Games of Money
Time for Money
Most people earn a salary by working for a company and trading time for money weather you are a doctor a programmer or a postman the money you earn is taxed and you live off what is left. If you can live off 70% and invest the rest it has a major impact in a short time because of the power of compounding.
Equity Growth \ Net worth
The traditional view is that if you invest you should try to create a big pile of cash until you get to the point that you have to retire then you can draw on it.
However my view is that this is the game people should play once all their other bases are covered.
Why do as many as 80% of Americans don’t think they will have enough money in retirement. On paper it’s a great strategy but it rarely pans out the way people expect. Playing this game requires a lot of specialist knowledge and because of this most people rely too much on the advice they are given vs. investing in themselves the agendas of the financial institutions muddy the waters.
e.g. 96% of mutual funds underperform the S&P 500 but charge 3% most of it through hidden fees that you don’t realize exist. An ETF like the SPY costs 2/10th of 1% and is the benchmark for the market. i.e. mutual finds cost 15 times more and have a compounded effect of 60% of the lifetime gains.
Cash Flow
The game of cash flow is fairly simple – Invest in assets that provide you a steady stream of income every month, there are lots of different assets they could be bonds or dividends however I think these are high risk in the current climate. Annuity policies can be good if you don’t want to put in the effort, however vehicles such as Real-Estate Rental income , Private Lending, patent/ royalties payments or creating your own Internet Business can be some of the best vehicles. Done right vehicles such as lending and real-estate can generate cash flow returns that beat the S&P with lower risk and have compounding effects that turn inflation into an advantage.
Must Read Books
- Robert Kiyosaki’s Book “Rich Dad Poor Dad” on mindset
- Keller Williams Book the Millionaire real-estate Investor on the mechanics
- George Antone’s Book’s the “Wealthy Code” and “ Bankers Code” are also great books on private lending and how finance works.
After living in 3 countries and experiencing different financial systems, I found myself questioning things that a lot of people took for granted. My uncle, who was an international currency trader in London, reinforced this by sharing stories of how a few individuals where able to change the forces of governments-take them on and win. In the process I became an unintentional economist. Thus, I have an alternative view of financial forces and headwinds that affect people’s lives such as the power of debt for good and bad, the true risks associated with different types of investing, and how different people hack the system. To do well today most people need to overcome the financial headwinds they are burdened with. By applying this knowledge it has allowed me to gain time back in my life to spend it on things that create meaning not just the daily grind of trading time for money. I have a great desire to share what I have learned along the way, mentoring others and helping them find their path and devising creative ways to capitalize on various market and economic events. Nowadays, having fun, presenting at conferences on economics and other financial topics, and building a coalition of the willing to take on the world, is my passion; I hope you can join me on this journey.
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