Invest wisely and safely

Pamela YellenIf you think it is impossible to invest wisely and safely, don’t miss a word of our interview with financial expert Pamela Yellen, the author of The New York Times’ bestseller Bank on Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future. 

Pamela has smart questions to ask yourself and your financial advisor about any investments you are considering.

You can’t afford to skip this interview.
DD:  What’s the difference between "saving" and "investing"?
PY: Don’t be surprised if your adviser can’t easily answer this question. Wall Street and the financial planning industry have led us to believe that "saving" and "investing" are the same thing.  However, they are not.  The money you have in savings is money you don’t want and can’t afford to lose.  Money you invest is subject to loss.  Most people today "invest to save," and as a result, have no idea what their nest egg will be worth when they plan to tap into it.
Tip:  Don’t put money you can’t afford to lose into stocks, real estate, or other traditional investments.  Before investing, ask yourself if your money didn’t grow for 20 or more years, or even went backwards, could you live with that?
DD: Are you basing your recommendations on "average annual rate of return"?
PY: Wall Street would have you believe that "rate of return" is the holy grail of investing.  But here’s a revealing little quiz:
Do you think it’s possible to invest $50,000 and get a 25 percent average annual return on your money every year for many years, and then end up with only the $50,000 you started with?
If you answered "no," you’re in for a real surprise!  Let’s assume your money increases by 100 percent the first year, and then goes down by 50 percent in the second year.  If you average those percentages, you have a 25 percent annual return.  Not bad, huh?
But let’s see how much money you actually have in your account: Your 100% percent increase in the first year doubled your $50,000 to $100,000.  Then you lost 50 percent in year two, leaving you with the same $50,000 you started with two years earlier!
So what good did getting a 25 percent average annual return do you?  You have nothing to show for your roller-coaster ride.  This is the kind of smoke and mirrors Wall Street illusionists have been using to pull the wool over investors eyes for decades!
DD: What’s the exit plan from this financial strategy?
PY: It’s important to know what your exit strategy will be before getting involved with any investment or financial vehicle.  Most financial advisors don’t properly warn their clients about what happens when you try to exit from government-sponsored retirement plans. You typically find out only after you’re deeply entrenched that these plans have more strings attached to them than a puppet.  Know all the restrictions and penalties up front
In addition, many people like government plans because they allow you to defer your taxes.  But what direction do you think tax rates will go over the long term?  If, like many people, you believe they’re going up, and you’re successful in growing your nest egg, you’re only going to pay higher taxes on a bigger number!
Tip:  My advice is to pay your taxes now – at least you know what they are.
DD:  Do you invest your own money in what you’re recommending?
PY: A surprising number of financial advisors don’t invest in the things they recommend to their clients.  This should be a red flag to you.  If they don’t have the stomach to invest in these things, should you?
Tip:  Ask your financial advisor to show you their account statements – the good ones will be willing to do so.
DD:  Should your financial adviser be able to tell what your retirement account will be worth when you need it?
PY:If they say "no," fire them, because there are proven ways to grow a sizeable nest egg you can predict and count on. My research into more than 450 different financial products and strategies over the last 20 years has led me to conclude that Americans have been brainwashed into believing they must risk their money in order to grow it.
Tip:  Demand your advisor show you options that give you guarantees and predictability, so you can be confident your money will last as long as you do.
For example, there is an asset class that has increased in value during every stock market decline and every period of economic boom and bust for more than a century – dividend-paying whole life insurance.  These policies grow by a guaranteed and pre-set amount every year.  In addition, the growth is exponential, meaning it gets more efficient every single year you have the policy – with no luck, skill, or guesswork required.
Furthermore, there are little-known options that can be added to the policy which turbo-charge the growth of your equity.  These are known as Bank On Yourself-type policies.  Once credited to your policy, both your guaranteed annual increase, plus any dividends you may receive, are locked in.  They don’t vanish due to a market correction. This gives you peace of mind for retirement planning, because you’ll know the minimum guaranteed income you can take in retirement, and for how long you can take it.  Plus, it’s possible to take retirement income from these policies with little or no tax consequences, under current tax law.
There are many myths about this powerful financial tool.  That’s why I created the S100, 000 Challenge.  It lets you test your knowledge of the facts about Bank On Yourself, and a $100,000 cash reward awaits the first person who has a different strategy that can match or beat it.
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