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Missed Fortune – You Have More In Common With the Super Wealthy Than You Think

Posted on | February 5, 2012

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Good Habits & Prudent Investments

Many investors, over the past 10 years, have seen their retirement nest egg lose, on average, nearly 40% of its value.  Why do they keep doing what they’ve been doing?

When people continually put their retirement money into 401(k)s and IRAs where taxes are deferred, they do it with a perceived future tax benefit in mind such as being in a lower tax bracket when they reach retirement.

Many choose to keep their money in the volatile market, expecting to ride out the ups and downs while waiting for the economy to recover enough to regain their losses.

But the future reality is that most will be facing higher taxes rates at a time when they have fewer deductions to offset their liabilities.

Those who’ve been willing to make necessary changes in the way they save for retirement can expect to achieve different results.  For example, thousands of Missed Fortune clients have chosen to use a strategic rollout to safely move their money from their 401(k) or IRA.

By doing this, they pay the applicable taxes today and then move those retirement funds into a vehicle where their money can accumulate tax-free from that day forward.

These are the people who’ve learned to utilize indexing strategies that indirectly link their money to market performance in such a way that they don’t lose a dime when the market goes down yet they benefit from any upside immediately.   Is it any wonder they don’t lose sleep at night no matter what the market is doing?

They’re simply applying proven principles and getting very different results from when they were simply following the crowd.  They have confidence in the future and peace of mind.

They’ve learned that liquidity, safety, and rate of return–in that order–are the hallmarks of a prudent investment.  These three ingredients combine to form the acronym LSRR (Laser) that is familiar to Missed Fortune clients everywhere.

If you have them, chances are that you’re watching your money grow safely year after year. When potential investments are lacking any one or more of them, you’d be wise to reconsider.

Sadly, most of the popular investment strategies advocated by many advisors fail the Laser test miserably.  You must understand how each potential investment stacks up in order to avoid choosing poorly.

Comparing Yourself To the Wealthy

What’s the difference between you and the super wealthy?  Not as much as you might think.

Fans of horse racing will especially appreciate this object lesson.

The Arlington Futurity racecourse is a mile and an eighth in length.  The winning horse may cross the finish line a mere head’s length before the second, third or even fourth place horses.  That’s a difference of just 1/3000th of a second.  If the winning horse beats the others by a nose length the difference is only 1/72,000th of a second.

The point of this observation is that, in most ways, the horses are quite evenly matched, and end result of the race comes down to those who recognize an opportunity and go for it.

There is a terrific lesson in this for anyone who wishes to utilize the Missed Fortune strategies.

Applying that same principle to the truly wealthy among us, we find that a clear majority of them didn’t just inherit their wealth—they worked for it and earned it.

So many Americans fail to  understand the miracles of wealth accumulation.   Too often, their financial advisors don’t recognize these marvels either.  A follow-the-herd mentality prevails as they leave their clients’ money at risk in the market in hopes of regaining their losses.

The first marvel of wealth accumulation is compound interest.  Albert Einstein referred to it as “the most misunderstood phenomenon on the planet.”  If you were to take a standard sheet of copy paper and you were able to fold it in half 50 times, how thick would it be after doubling in thickness each time?

The answer is a staggering 93 million miles.

If you were to take a single dollar and double it for 20 consecutive periods, it would total $1,048,000.   But, it this is only possible when that compounding interest accumulates tax-free.  If it’s taxed as earned, that same dollar will only be worth $27,000 at the end of that same 20 consecutive periods.

This brings us to the second miracle of wealth accumulation—tax-free accumulation.   If your million-dollar nest egg is sitting in an IRA or 401(k), it’s not really worth a million dollars.  Uncle Sam will be looking for his cut in taxes, which in most states will amount to about 1/3 of your money.

When you consider the prospect of taxes going up for the average middle income American over the next decade, it’s essential that your money accumulate in a tax-free environment.

The third miracle of wealth accumulation is that of safe, positive leverage.  If Donald Trump were to go shopping for a skyscraper, he wouldn’t just write out a check for the full amount.  Instead, he’d put the least amount down possible.  And then he’d try to borrow whatever he put down back out as soon as possible.

The idea here is to keep from having too much of your money tied up in your assets.  If you’re borrowing money for your business or for real estate at 4% and you can predictably earn a rate of return of 8%, you now have the potential for an infinite rate of return.

It’s like hiring an employee for your business for $40,000 per year who turns around and earns your business an extra $80,000 per year.

These miracles are understood and practiced by the super wealthy thrivers among us.  When you understand them and apply them along with the Missed Fortune strategies, you’ll see that you have more in common with the super wealthy than you thought.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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