June 22nd, 2010 → 4:31 pm @ Nik
You’ve heard the cliché that if you want to increase your returns, you must increase your risk, right? Do you believe it? Do you think that commercial real estate investing is risky for Donald Trump? Do you think that building a business is risky for John Assaraf or Michael Gerber? Do you really believe that you have to choose between a conservative approach with low returns and a risky approach with high returns?
Typical Investing: High Risk = High Return Strait Path Investing: Least Risk = High Return
That cliché is a deception perpetuated by institutions and individuals with vested interests — by convincing you to take on more risk, they can transfer their risk to you. High-risk investing isn’t investing at all — it’s gambling. It’s for those who get a thrill from the game or for those who didn’t work hard to earn their money (easy come, easy go). It’s certainly possible to win big with high-risk investments, but it’s more likely that you’ll lose big.
Is this really how you want to live your life? Would you prefer to feel anxious or secure about your investment choices? When investing is done right, it’s both safe and lucrative. It does require you to have more control and to be more actively involved than traditional investing, but it’s doable. Our clients prove it every day.
Personally, I’m highly averse to risk. I strive to do everything in my power to reduce risk and create certainty. I want to feel confident in my ability to earn a profit with each investment. This is why I reject 401(k)s, IRAs, and other similar vehicles — they’re way too risky and I have far too little control over them.
It’s also why I shun any form of speculative real estate investing. I’ve analyzed every other form of real estate to be able to do just that. High-flying, risky strategies have no place on the Strait Path.
No amount of money is worth the fear, anxiety, and uncertainty. And, interestingly enough, our system makes higher and more consistent returns than any other, while reducing the risk. This may sound paradoxical, given how often we’re taught that high risk equals high returns. Once you understand Strait Path real estate, however, it becomes common sense.
• How risky is this investment?
• What’s the likelihood of its success/failure?
• What guarantees does this investment carry?
• Is this investment collateralized?
• Do I have a solid exit strategy?
• What options do I have if things go wrong?
• How can I reduce my risk as much as possible?
May 17th, 2010 → 12:40 pm @ Kris Krohn
There are many who continue to teach the broken, outdated advice regarding accumulation vehicles and home equity. And the argument could be made that accumulation doesn’t work because people aren’t saving. (See this article: www.doctorhousingbubble.com/american- savings-americans-save-an-average-of-392-per-year-total-consumer- debt-is-over-25-trillion-the-dark-knight-of-debt/.)
That may be true but it doesn’t change the fact.
I’m all for disciplined saving and financial responsibility. But I reject the idea that financial independence comes from handing off our money to institutions and praying that they’ll take good care of it.
The practice of putting money into accounts that we don’t understand and that we have little control of is silly. Depending on a nebulous, volatile, and fickle “market” to secure our financial future is gambling, not investing. Competing with inflation means that most people are lucky to earn one or two percent annual returns on their retirement funds.
It’s obvious that something more practical and likely to succeed is needed. We need a system that encourages more personal responsibility and provides more control and safety to individuals. We need tools for outpacing inflation, beating burdensome taxation, transcending market volatility, and producing passive income.
What’s really needed is a fundamental shift in mind-set, rather than more or different products and strategies.
This critical shift occurs as individuals choose the creative power of abundance over the limiting mind-set of scarcity. It occurs as we learn to create opportunity, rather than wait for the market to take care of us. It manifests as exponential growth as we learn to make money work for us, rather than working for our money. It happens as we take direct responsibility for our financial health and realize that we as individuals are our best investment. There’s no hot stock or trendy mutual fund that’s going to give you lasting wealth. No “expert” or institution cares more about your money than you do.
You are the only one who can take charge and make your dreams a reality.
mind set &Real Estate Compared & Contrasted &Retirement &Traditional Investments
May 12th, 2010 → 4:07 pm @ Kris Krohn
When I do these calculations for most people I meet with — and even when I add Social Security to the total — it’s realized that they’ll be forced to live off a third or less of what they have been accustomed to their whole lives. Try this exercise for yourself.
1. Write down how much of your income you consume annually for living expenses and recreation.
Total Expenses (A): ____________
2. Write down how much you currently have in 401(k)s, IRAs, annuities, or mutual funds.
Total Savings (B): _____________
3. Next, write down the best scenario of what you think those funds will grow to by the time you reach age sixty-five.
Projected Total Savings (C): ______________
4. Multiply your final projected number (C) by 5 percent to get the annual dividend you’ll receive at retirement. (C × .05 = D)
Projected Annual Retirement Dividend (D): _______________
5. Now calculate what percentage of your current standard of living that dividend will support. (D ÷ A = E) Convert E into a percentage by multiplying by 100.
Retirement Income as a Percentage of Your Current Standard of Living (E): __________
May 11th, 2010 → 4:00 am @ Kris Krohn
Specifically, we’ve been trained to think that the road to retirement is to work at the same job for thirty years, contribute to a 401(k), IRA, or other qualified plan, diversify our portfolio, and wait, counting on the market to bring us the returns we need to build a large enough “nest egg” that will allow us to live off the interest.
This system — this accumulation mind-set — is broken and outdated.
It hasn’t worked for the vast majority of workers. Furthermore, its chances for success only get dimmer with time as the financial crisis deepens and we continue to live longer.
Even if we assume perfect market conditions, will traditional savings plans be enough?
Almost everyone I pose that question to answers “No.”
If that’s the case, then why do we continue contributing to something that we already know is broken?
(If you question whether traditional investing is broken, read this article that explains why your 401(k) may be your riskiest investment.)
For most, the annual retirement income will provide only a small fraction of what is needed to maintain the current standard of living during retirement.
When I do these calculations for most people I meet with — and even when I add Social Security to the total — it’s realized that they’ll be forced to live off a third or less of what they have been accustomed to their whole lives.
Furthermore, when you add inflation to the calculations, the projections look even grimmer.
It’s clear to see why I call this system broken; it’s simply impossible for most people to accumulate enough money to make it work.
