One of the biggest gifts that was given to me was on October 14, 2007.  It was the day that Imtiaz finally persuaded me into saving money for my future. I had scraped together some limited funds and handed it over to my newfound financial advisors.  I was using Mercer Advisors at the time and they did a masterful job for me and have managed through proper investment and the sheer miracle of compounding growth to grow that paltry sum into a significant savings for my family and I.

Through thick and thin, market ups and downs, through the crash of 2008, I kept saving and adding to my initial sum.  Many times I wondered if there was a short cut- a better way.  Many times I was approached with alternative investment advice promising low taxes, high returns and the safety of a guaranteed return.  While I’ve changed my investment advisors to someone local in Scottsdale, UMB Bank, my philosophy has remained the same – to stay away from get rich schemes and just save baby save!

When you choose an investment advisor, if you decide you need help, my recommendation is to choose a company that is a fee-only advisor, which means that they charge a percentage of your investment account to manage your money.  Typically this percentage is from .5-1% of your account.  So if you have one million in investable assets, they charge 5-10k a year to manage the funds. 

Now we can get into the debate of why you would want to pay someone 10k or more a year for something that you can theoretically do on your own. If you are disciplined enough and know enough about investing, then by all means do the investing yourself and save money. An incredible resource if you want to do your investing yourself is https://dentistmarketalert.com. This website run by a fellow dentist, Dr. Ernie Johnson, is a must read for any do it yourself investment guru.

I can just tell you that in my case, the returns that were generated with the help of an advisor far outweighed the fees charged.  Not that I likely could not have generated the results on my own, but more because of time. I felt my time would be better served running my own business rather than trying to be an investment expert through the school of hard knocks.

When searching for an investment advisor, what I would suggest you run away from is someone who tries to disguise investment advice in the form of trying to sell you insurance.  This is a particularly profitable venture but unfortunately it is for the insurance agent through the commissions generated by the sale of the insurance policy.

A popular insurance product that insurance salesmen try sell to would be investors is whole life insurance.  There are many forms of this insurance with different names but the sales pitch is the same:. You have guaranteed returns so when the market is bad, you still make money. You have permanent insurance.  You can take a loan from your insurance policy tax free. All these promises sound great but lets talk about each one of these in detail.

Now I am sure somewhere for some individual these types of insurance policies might make sense.  For the vast majority of individuals, they make no sense whatsoever.  Simply put there are high commissions associated with these policies.  I’ve heard of up to 16% commissions on the value of the policy.

So if your “investment advisor” sells you a million dollar whole life policy, the commission to the agent is $160,000.  Now I am all about people making a good living for work rendered. This is not my issue with the massive commission. Good for the insurance salesman for making money.   The issue I have is if this is sold as an investment, the moment you buy it, your one million dollar investment is 840k.  How’s that for a return?

Guaranteed Returns

One tactic used to sell these policies is the allure of guaranteed returns, normally in the 4-6% range.  Listen, if you absolutely cannot stomach any market volatility and don’t mind paying a premium for the peace of mind that a guaranteed return provides, then by all means go ahead and buy a whole life policy.

But lets look at facts for a second.  The S&P 500 from 1928 to 2016 returned an average of 11.42%[1].  The return on average from 1967 to 2016 was 11.45%.  That’s fine and dandy you say but that doesn’t apply to me because my investment was destroyed by the 2008 crash.  Yes, the market crash of 2008 resulted in a -36.55% rate of return.  But 2009 saw things bounce back and we had an increase of 25.94%. 2010 had equally impressive returns of 14.82%. In fact if you look at the average of returns from 2007-2016 the return was 8.65%.  You may not trust the market, you may claim the market is rigged, you may say its all in favor of the fat cats on wall street who manipulate the market.  Yes, all of this may be true. But the fact remains that if you invested $100 in the stock market in 1928, that $100 would be worth $328,645.  That same $100 invested in bonds would be worth $7110.65 in 2016.

As an example let me share with you a sales pitch that was given recently to a friend of mine. She is in her mid 30s with a very successful practice. Her “investment advisor” gave her a pitch for an alternative investment that she was intrigued with. She sent me the email below asking for advice.

“I met with my financial advisors yesterday and they proposed an investment strategy that sounded great but almost too good to be true so I was curious if you have heard anything about it.

To make it work you have to be a business owner and have a take home income of over $350,000. The basis of the strategy is I would take a loan from a bank for $1mill to purchase an Executive Retention Plan (Life Insurance Policy). This loan would have a static interest rate of 3.6%. The first draw from the loan would be $250,000 which is what the cash surrender value is of the life insurance policy at day 1. The insurance policy value compounds interest at an average of 6.5% over the last 30 year history with a floor of 0% and a ceiling of 10.5% following the S&P Index. I would take the additional loan money out in amounts of $250,000 as the cash value of the policy increases so there is no risk. The collateral of the loan is only against the insurance policy, not my practice. The practice takes out the loan, I take a loan personally for the practice and the insurance policy is then mine personally. 
 
The end goal is at age 55, I can start to draw off of this account monthly as non-taxable income at $150,000/year. It is essentially taking out a loan against the policy but no penalty to pay it back, it just takes away from the death benefit. It is high enough that at age 90 I will still have about $1Mill remaining in the policy. Because it is all collateralized against the insurance policy they are saying this will not affect my practice financials if I need to make any additional purchases, etc. “

Now I am a simple man with a simple rule.  If I don’t understand the investment, I usually don’t invest money in it.  Frankly I don’t understand what they are trying to do above but I think I see a couple of things they are trying to accomplish.  They want her to buy an insurance policy for 1 million dollars. That insurance policy will return on average 6.5% (recall the average rate of return for the S&P 500) and it will allow her to withdraw 150k tax free.

Lets do some basic math shall we.

The premiums for this policy for 20 years is 45k/year.  That is $900,000 in total payments for the 1 million dollar insurance policy.  If we were to take the same $45000 payment and save it and every year for 20 years add $45,000 to our savings instead of paying an insurance premium and were able to garner on average a 9% rate of return, we would end up with a little over 2.7 million in the bank.

[1] http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

​

Now if I was to say trust the market and instead of 9% rate of return we estimate that we might get 11% rate of return, well, that gives the individual a bit over 3.5 million in their account.

So if the individual is 38 years old with a desire to retire at age 55 – if for the sake of math we bump up the retirement age up to 58 so we get a full 20 years of 45k investments, that individual has over 3.5 million in savings if they didn’t invest anything else.    I would assume that if someone was going to make insurance payments of 45k a year, likely they would save more money for their retirement so if we just assume that this doctor was going to pay in one scenario 45k for investments and another 45k for insurance premiums, and instead they put the full 90k a year towards their retirement, now we have over 7.1 million in savings.

With 7.1 million in savings, anyone can quickly see that this is a way better return than buying an insurance policy and then taking a “loan” against your policy to fund your retirement

But lets play along with the insurance agent and humor them.  Lets just assume we have the original 3.569 million saved up.  Will this amount be able to match the 150k tax free the insurance policy would give?

If we were to take the 3.569 million and assume a rate of return at 11% (historical rate of return for S&P is 11.42% for over 90 years) and every single year take out 224k what would happen to our money?   224k because that allows you to pay 74k in taxes and you have the same 150k or MORE that the insurance policy would give.

Here are the numbers for an 11% rate of return.  Every year starting at age 58 you take out 224k and invest the rest.  Assume you pass away at age 85.  Well, then you leave a measly 30million plus to your heirs. If you purchased the insurance policy, well, you get your death benefit passed on to your heirs minus all the money you have already taken out as a loan to yourself.

Ok I get it, you don’t trust the market- then lets be more conservative and only calculate a 9% rate of return- here is what you get from age 58-85:

​​

You still leave 14 million plus to your heirs, you still take out the 224k a year. 

Fine you really don’t trust the market- lets use then 6.5% - the same your insurance policy was going to pay you. You die and leave over 4 million to your heirs and you still had the luxury of taking out 224k a year.

Bottom line is no matter how you slice it, instead of paying premiums for an insurance policy, if you just invest the money instead, you come out ahead. Way ahead.

Life insurance should never be used for investing.  Well, never say never cause as I stated there might be some person out there for whom this investment strategy might make sense but for the vast majority of individuals using insurance as an investment does not make sense.

Well, then if you hate whole life insurance so much Sam, what kind of insurance should I buy?  Buy term insurance folks.  Cheap, cheap, cheap. One million in term insurance for a healthy 35 year old is less than $1000 a year. [1]  Term rates are cheap- you get more insurance for you money and frankly you need insurance so that the family you leave behind has enough money to continue their lifestyle.  That’s it. 

Permanent Insurance

But Sam, after 20 years the term policy will run out and I will be old and getting more insurance will be too expensive.  Whole life insurance is permanent insurance in that it can never be taken away.

Think back to the scenario where you are getting an 11% rate of return- you die with 30 million in the bank. Why do you need insurance in this scenario?  You are self-insured. Your heirs for generations can live off this money.

Take a loan from your policy

With 4 million to 30 million saved depending on your discipline of saving through thick and thin, why would you need to take a loan from yourself?  This is another selling point of the whole life policy correct?   To me, just withdrawing my own money instead of taking a loan sounds a heck of a lot better.

The bottom line guys is don’t get sucked up into fancy investments. The best thing you can do is buy cheap term life insurance for the amount your family needs to live if something were to happen to you.  Insurance is to be used for insurance, not as an investment. The only people that profit from this are the insurance agents.

I hope this paper was able to generate some information for you and arm you with a rebuttal when someone tries to sell you insurance and disguises it as an investment.

[1] https://www.goodfinancialcents.com/how-much-does-a-million-dollar-term-life-insurance-policy-cost/

Wow. Great advice!
I think this is a topic that is good to discuss. I don't have much to add besides SAVING.
I am by nature a saver. If course I have my fun stuff that I blow money on... but if i had any advice it would be to set a monthly amount and consider it a bill. You invest that every month no matter what. Good month or bad month. I know that advice sounds a little bit "elementary " and obvious... but my feeling is that most don't do it.

I agree with Sam to stay away from risky investments. I have been successful and I have been burned... in the end I don't do it much anymore.
What Ernie does is unique, but he is a great person to run by your personal strategy for advice.... i.e., come to Scottsdale more because he is always here ;)

Wow thanks Sam for taking the time to put that together. Some of that I've heard before, much of it I haven't. I've started to realize recently that the one commodity we have that is truly finite is time. I am trying to delegate more and more, even though it may cost me more in the short term, in order to maximize my productive time, my family time, my fun time.....this is another great example. So absolutely, unless you're cut from the same cloth as Ernie, delegate this very important task and listen to the advice of guys like Sam and Mike who have been through it.

Mike, what you said about paying a bill is something that Tony Robbins said to us that stick with me; I've not been as good about it as I'd like, but it's on my mind and I'm getting more consistent with it.
Great topic

J

Great post and advice...it is too easy to keep spending what we earn, so make sure to pay yourself(save) first!

Index funds. Vanguard 2045. Boom.

Holy crap Sam!  Thanks for putting so much time into this!  It's a lot to digest....take home message is loud and clear.  Start saving...now!

On 7/19/2017 at 8:18 pm, Joel Jahimiak said...

Index funds. Vanguard 2045. Boom.

Index funds are great. They start out with more equities and over time get more bonds into the mix as you get closer to retirement.  I do not invest in them for one reason. I dont want a high percentage of bonds in my portfolio.  I may change my feelings over time but the average rate of return of bonds from 1928 to 2016 is 5.18%.  Equities are 11.42%.

This is to be expected as there is less volatility with bonds but over the long term if I can average twice the rate of return, I want to do that to reach my goal number faster.

I know this is controversial what Im doing as there is more risk involved but Im on a long term horizon so Im willing to tolerate the risk.  Like I said ,this may change over time for me but for the time being, Im keeping a minimum of bonds in my portfolio.  More aggressive investing = higher rate of return.  It also means more risk and you could lose more in a market turndown.

At this time Im wiling to take that risk.  Maybe in 10 years, my mind may change.

On 7/19/2017 at 8:32 pm, Sameer Puri said...

On 7/19/2017 at 8:18 pm, Joel Jahimiak said...

Index funds. Vanguard 2045. Boom.

Index funds are great. They start out with more equities and over time get more bonds into the mix as you get closer to retirement.  I do not invest in them for one reason. I dont want a high percentage of bonds in my portfolio.  I may change my feelings over time but the average rate of return of bonds from 1928 to 2016 is 5.18%.  Equities are 11.42%.

This is to be expected as there is less volatility with bonds but over the long term if I can average twice the rate of return, I want to do that to reach my goal number faster.

I know this is controversial what Im doing as there is more risk involved but Im on a long term horizon so Im willing to tolerate the risk.  Like I said ,this may change over time for me but for the time being, Im keeping a minimum of bonds in my portfolio.  More aggressive investing = higher rate of return.  It also means more risk and you could lose more in a market turndown.

At this time Im wiling to take that risk.  Maybe in 10 years, my mind may change.

Not all "index funds" have bonds in them or increase a bond percentage over time. Index funds can follow any one of thousands of indexes including the S&P 500 which have 0% bonds in them. I believe that what Joel is referring to is actually the Vanguard Target Retirement 2045 Index Fund which currently has a 10% bond holding and won't increase it's bond percentage for many more years. It's my opinion that "index funds" are fantastic investment vehicles . . . depending on which ones you choose. While I'm not currently investing in Vanguard 2045, the data shows it's a solid choice. Great topic with many great points!

https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/

This website is with out a doubt the best website on the web discussing any and all issues related to personal finance.
The comments section are the most entertaining with life insurance salesmen weigh in with their "expert" opinions.

Also, one comment on financial advisors.....fee only is key. Some will try to slide by with the term fee based....in Sam's example paying a percentage of assets under management (which I would NEVER do) can be a way of paying for expert advice but one had better be damned sure that the advisor isn't slamming you into high expense mutual funds such as the American Funds family and is instead placing you in low cost index funds. If the advisor is taking his .5-1% off the top and still placing you in non index funds he is generating yet more income and you are generating less returns on your investment.

Here are a couple more links that expand on Sam's post

https://www.whitecoatinvestor.com/mutual-fund-expenses-back-to-basics/

https://www.whitecoatinvestor.com/the-impact-of-mutual-fund-fees/

And here is a link to what I think is the most interesting article on his site
https://www.whitecoatinvestor.com/active-mutual-fund-managers-not-getting-any-better/

Great advice!  And in contention for longest cdocs post ever!  Well worth it!  Thanks Sam. 

When I started my practise 25 years ago I told myself I was going to add money each month...like a bill as Mike said.  I found myself hit and miss depending on the month I was having.  My financial adviser told me to set up auto pay.  Best advice I was ever given.  For the last 22 years I have never missed a month. 

On 7/20/2017 at 2:49 am, Mark Kleive said...

On 7/19/2017 at 8:18 pm, Joel Jahimiak said...Not all "index funds" have bonds in them or increase a bond percentage over time. Index funds can follow any one of thousands of indexes including the S&P 500 which have 0% bonds in them. I believe that what Joel is referring to is actually the Vanguard Target Retirement 2045 Index Fund which currently has a 10% bond holding and won't increase it's bond percentage for many more years. It's my opinion that "index funds" are fantastic investment vehicles . . . depending on which ones you choose. While I'm not currently investing in Vanguard 2045, the data shows it's a solid choice. Great topic with many great points!

Mark,

you are absolutely correct. I should clarify that what I meant was "Target Date Index Funds" increase their bond allocation the closer you get to retirement.  Index funds are great- I have a ton of them in my portfolio.  I just am not doing target date funds.  Nothing wrong with them and in a future time I might change my mind and get more into them but just for my personal philosophy, they dont fit.  But they are great for many.

sorry for the confusion.

On 7/20/2017 at 4:07 am, Douglas Anderson said... https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/ This website is with out a doubt the best website on the web discussing any and all issues related to personal finance. The comments section are the most entertaining with life insurance salesmen weigh in with their "expert" opinions. Also, one comment on financial advisors.....fee only is key. Some will try to slide by with the term fee based....in Sam's example paying a percentage of assets under management (which I would NEVER do) can be a way of paying for expert advice but one had better be damned sure that the advisor isn't slamming you into high expense mutual funds such as the American Funds family and is instead placing you in low cost index funds. If the advisor is taking his .5-1% off the top and still placing you in non index funds he is generating yet more income and you are generating less returns on your investment.

Doug,

you are correct that AUM (assets under management) is not right for everyone. Its the method I have used with great success but yes, I know Im paying a premium. At this point, Im ok with that. When I have more time to manage my portfolio, I may change my mind.  

This has been something I have been thinking about a lot lately. My wife and I both started saving about 10 years ago with Northwestern Mutual through Whole Life and Variable Life plans. I'll be honest: I didn't really understand it then and I still have a hard time understanding it now, but I wanted to make a good decision and start putting money away right out of dental school and I felt like "Hey, at least I'm doing something constructive." I literally had just got off the phone leaving a message with my financial adviser to schedule a call with him when I saw this post. Perfect timing. Thanks for taking the time and effort to write this up, Sam.

Fire them ray and cash out your policies and invest in the market.  Insurance is for insurance. Not for investing. What you have is not a financial advisor. You have an insurance salesman.  A true financial advisor would never suggest whole life and variable life insurance as an investment.

Sam,  what has been the average percentage your advisor has returned?  Isnt 9 - 11% exceptional for something you dont have to put any effort into?

I am definitely considering it, Sam. This post really helped answer a lot of the questions I have had over the last few years and thank you again for writing it. The one thing it doesn't really factor in is the difference between being taxed now (Whole Life) vs taxed later, but considering the financial ramifications of being taxed now (deductions, etc) I am not sure being taxed later is the big scary monster it is made out to be either.

On 7/20/2017 at 4:07 am, Douglas Anderson said... https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/ This website is with out a doubt the best website on the web discussing any and all issues related to personal finance. The comments section are the most entertaining with life insurance salesmen weigh in with their "expert" opinions. Also, one comment on financial advisors.....fee only is key. Some will try to slide by with the term fee based....in Sam's example paying a percentage of assets under management (which I would NEVER do) can be a way of paying for expert advice but one had better be damned sure that the advisor isn't slamming you into high expense mutual funds such as the American Funds family and is instead placing you in low cost index funds. If the advisor is taking his .5-1% off the top and still placing you in non index funds he is generating yet more income and you are generating less returns on your investment.

+1

Like Ray, 15 years ago I was advised to fund a whole life policy. I cashed out just 1 year later and thank God it only cost me $5K. The initial investment deposit was $10K so a smart person can figure out what the commission was.

Great thread and perfect timing on the post, had tomorrow scheduled to review all my (semi) existent investment strategies. So easy for us dentist owners of falling in the trap of just spending our earnings and using our practice as our "retirement" strategy... Great reminder and advice to be way smarter about it.

On 7/20/2017 at 9:51 am, Thomas Kauffman said...

Yes Sam.  But in your situation you spent $6,079,000 for your home, which changes the numbers, plus the 229,000 a year you pay for aquarium fish maintenance.  Plus the expense of your pot party when everyone gets very hungry and eats all the fish, requiring a restocking of the tanks, ..... just sayin.  sometimes the numbers do not turn out as expected.

as an aside, Eric and Laura Prouty  came  and spent a weekend with us in Atlanta.  Eric is doing well, great prognosis, and we saw 2 of the 3 games when the Braves took 3 from the ariz. boys.  Great to see him, we even played catch which was a lot of fun.  Eric is a real miracle

great topic.  thanks for posting.

tk

the house was 5.9 million but the fish tank maintainance is 250k a year!  

BTW- good to hear about eric! Glad he is doing well.

On 7/20/2017 at 12:17 pm, Sameer Puri said...

On 7/20/2017 at 9:51 am, Thomas Kauffman said...

Yes Sam.  But in your situation you spent $6,079,000 for your home, which changes the numbers, plus the 229,000 a year you pay for aquarium fish maintenance.  Plus the expense of your pot party when everyone gets very hungry and eats all the fish, requiring a restocking of the tanks, ..... just sayin.  sometimes the numbers do not turn out as expected.

as an aside, Eric and Laura Prouty  came  and spent a weekend with us in Atlanta.  Eric is doing well, great prognosis, and we saw 2 of the 3 games when the Braves took 3 from the ariz. boys.  Great to see him, we even played catch which was a lot of fun.  Eric is a real miracle

great topic.  thanks for posting.

tk

the house was 5.9 million but the fish tank maintainance is 250k a year!  

$250K a month fish tank service aint bad!

Have two tanks in the office. Check out these cool Australian Look Down's I got last year 

On 7/20/2017 at 8:10 am, John Daw said...

Sam,  what has been the average percentage your advisor has returned?  Isnt 9 - 11% exceptional for something you dont have to put any effort into?

This post from earlier this year may be helpful to understanding if Sam's returns are exceptional, average, or subpar.

https://www.cerecdoctors.com/discussion-boards/view/id/54433

I am mentoring Level 2 (what else is new?) all day today or I would take the time to respond more fully, but I'll be sure and chime in again when I get a chance!

I'm always up for a discussion, have great references for folks who want to work with a professional, and hope you will stop by the website to learn more. Thanks for the shout out Sam!

On 7/20/2017 at 8:10 am, John Daw said...

Sam,  what has been the average percentage your advisor has returned?  Isnt 9 - 11% exceptional for something you dont have to put any effort into?

John I'll have to go back and look at the numbers but I know off the top off my head we have been at or above the market every year.

you don't necessarily need an advisor.  Ernie is proof. But my level of knowledge and time to execute the details is limited.  As someone can do they own taxes, I use an accountant.  Some people manage their own money, I use an advisor.  Not right or wrong here-  it's just be consistent, save early and often and avoid schemes such as whole life as an investment.

when you have been investing in the second longest bull market in history its easy to measure performance , talk to me after yoiu have experienced a few bear markets and see if you want to manage your own money or have a professional to blame

On 7/21/2017 at 5:09 pm, Marc Kaufman said...

when you have been investing in the second longest bull market in history its easy to measure performance , talk to me after yoiu have experienced a few bear markets and see if you want to manage your own money or have a professional to blame

Long term investments - bear or bull market.  Doesn't matter.  Invest consistently.  Save early, save often.

Great Post Sam. Thank you for taking the time to help us all. 

On 7/21/2017 at 5:09 pm, Marc Kaufman said...

when you have been investing in the second longest bull market in history its easy to measure performance , talk to me after yoiu have experienced a few bear markets and see if you want to manage your own money or have a professional to blame

Stop by the website Marc, and read about the system I am sharing with those that want to avoid EXACTLY what you are talking about.  If you use an advisor, consider it just as a "check up" or "second opinion" when they have never used the word "SELL" in their entire investing life to ask them to prune back your holdings when conditions are ripe for a possible downdraft in the market.  If you have any questions, feel free to PM or e-mail me at info@dentistmarketalert.com.

On 7/21/2017 at 5:09 pm, Marc Kaufman said...

when you have been investing in the second longest bull market in history its easy to measure performance , talk to me after yoiu have experienced a few bear markets and see if you want to manage your own money or have a professional to blame

It's funny you mention this.  I had a friend bet me a dollar last year that the market was going to crash to 1300.  It was around 17000 I think at the time.  A friendly wager and obviously I won the bet.

here is the sad part- he "felt" the market was going to crash.  Pulled out all his money.  Then at 18000 he thought it was too late to get back in.  Same at 19k.  Same at 20k.  And he missed a massive run up.

very difficult to time the market so I stay invested through thick and thin.  But i will be giving Ernie's technique a try in the future with a portion of my holdings.

​Sam 

Great post......early in my practice I did whole life and realized on my own that I coulkd do bettter in long term if I was invested in investments so I switched all but 10 percent to investments 10 years ago........wish I saw this post 25 years ago this is an excellent topic..........hope all the younger dentist read this..........

Hey Sam if you had put up this post 25 years ago I would be retired by now!
Great advice.

Fortunately I still love dentistry most of the days

I hear you.  My parents got screwed by this as well.  20/30 years ago- I forget when, a family "friend" sold them a bunch of whole life policies.  Even convinced them to take out policies on my brother and I.  I was in my 20's.  My mom proudly told me that she took out a policy and I could take a loan against it when I get older. 

fast forward when I took control of the policy, I cancelled it.  I knew it was a scam when the insurance agent would not stop calling- trying to convince me to reinstate the policy.  I kept avoiding his calls.  Literally must have called a 100 times.

saw the jerk at a wedding- chewed his ass out for trying to screw my parents!!!  Hate that guy to this da.

I have a small policy which have some cash value. I called the company and told them I want to take the cash out. They told me it would be 7% interest. So they want to charge interest on my own money. Tomorrow i will cancel it.

And here you are.  These are a rip off.  Glad you are getting out Zahir!

I had a "family friend" try to sell me life insurance as investments. Then he died and turns out he didn't have any life insurance himself...whole or term...

Great topic and well written Sam. I have also always put money away every month into my retirement plan for over 30 years and yes it has grown. I am with my 3rd investment advisor and have made profit. But by far reality has been my best investment from buying my first two buildings to now 12 rental properties. You have monthly income and presently all properties have doubled in value with 0 management fees. It is nice to go to work because you want to not because you have to.

Cliff-  that sounds fantastic.  Agree- diversity is great.  We have some rentals but have a management company helping.  Again- you can do it on your own and at some point in the future I might but for now- professional help makes sense for us.

On 7/23/2017 at 4:12 pm, Sameer Puri said...

Cliff-  that sounds fantastic.  Agree- diversity is great.  We have some rentals but have a management company helping.  Again- you can do it on your own and at some point in the future I might but for now- professional help makes sense for us.

Jake,

i think it's not and either or question.  You do both.  You have some real estate that makes sense.  You have some money in the market.  You take some calculated risks, but don't leverage your self too much or expose yourself to risky investments.  

Be smart and question every deal. That's just he are minimum.

but the whole life insurance thing is just a scam pure and simple.  Stay away from junk "investments" like these.

be smart with your money and if anyone promises you a homerun, be skeptical.  Your goal should be lots and lots of safe singles instead of trying to swing for the fences and striking out.

great to meet you btw-  I hope you enjoyed the workshops.

On 7/23/2017 at 6:13 pm, Sameer Puri said...

Jake,

i think it's not and either or question.  You do both.  You have some real estate that makes sense.  You have some money in the market.  You take some calculated risks, but don't leverage your self too much or expose yourself to risky investments.  

Be smart and question every deal. That's just he are minimum.

but the whole life insurance thing is just a scam pure and simple.  Stay away from junk "investments" like these.

be smart with your money and if anyone promises you a homerun, be skeptical.  Your goal should be lots and lots of safe singles instead of trying to swing for the fences and striking out.

 

great to meet you btw-  I hope you enjoyed the workshops.

 

 

Oh man!!! Sorry to hear.  I ended up going to a movie with a friend.  Spider-Man .  

A new post is up at dentistmarketalert.com.  Just a little market commentary and a few questions you need to ask yourself at this point in the investing cycle.  Stop on by!

He didnt try to screw my parents- he did screw my parents!!

My mom and dad were first generation immigrants here.  They just have never been super financially savvy.  The allure of being able to "take a loan" from your own friggin investments made them sign up for these ridiculous financial vehicles.

Never did they realize that the rate of return is so bad and it never hit them that why the hell should you ever need to take a loan from your own money!

Smart. Marking it for future thinking. 

Very smart advice here to start early. What if you start late? Lets say you are 50. Would you take more risk in your investments or just make the best of it until you can't practice anymore?

On 7/26/2017 at 8:17 am, Judson Connell said... Very smart advice here to start early. What if you start late? Lets say you are 50. Would you take more risk in your investments or just make the best of it until you can't practice anymore?

Great question.  As always, the answer is "it depends."

My first advice:  find a good financial advisor, disclose ALL your financial and life goal information to them (don't hold anything back thinking you are being smart), and run a retirement analysis on your assets.  What is your current and future projected net worth and can you sustain your life goals with a spend rate of 4-5% of your net worth annually?  [by the way, 4-5% withdrawl rate is considered the "norm" for most investments to remain self-sustaining.  Pulling out more carried a higher risk of running out of money before you pass away or suffer an adverse market event.]

Example:  You have $1M net worth.  Can you live on $40-50k per year in "income" from your net worth?  Do you have a mix of assets that allows you to "sell off" or "income produce" that $40-50k per year?  If you only own your home, you can't sell $40-50k of your home each year, but you could sell $40-50k of stocks, bonds, or receive dividend income from those to produce the needed cash to spend annually.  And you have to be REALISTIC about what you are going to spend each year!

What are your current assets producing each year now?  Are you maximizing your current retirement plan(s) that are in place?  For example, for those of us in our 50's, we can set aside an extra $6k into a qualified retirement account (e.g., 401k) on top of the normal annual limit of $18k in 2017 (provided you don't run afoul of top heavy and other limitations that your plan advisors and TPA should be able to figure out for you).  That is one way to "catch up!"

What about saving outside of a retirement plan once they are maxed out?  Granted, you don't get the benefit of tax deferred compounding that retirement plans are so blessed with, but hey, saving money to spend later and investing it wisely isn't such a bad deal and will help you reach your "number" that has been determined from the discussion you had with the financial advisor!  Plus, you might be able to spend that money FIRST and allow the tax deferred growth continue on your retirement funds for a few years longer.

I'm 35 and doing exactly what TK said above. My guy who is a dental cpa and true life/financial planner is making sure I have this in place along with the partnership having all this in place. Having someone help is a big deal.