There is something occurring right now that concerns me… and ought to concern you, too. So I urge you to pay close attention to this blog post…
Individual investors are moving into stocks and riskier investments
Since the financial crisis, and until very recently, individual investors (that’s you and me) largely avoided stocks. But now, as the stock market continues on a sharp rise that is already one of the steepest in history, people begin to fear they will miss out. According to a recent article in the Wall Street Journal1….
Stock-market fever is one of your biggest enemies as an investor… It’s pure instinct. We’re hard-wired to run with a stampeding herd and to seek safety in numbers.”
The article advises that you shouldn’t trust the crowd, because, “they’re usually wrong. Time and time again, studies show the public invests at the wrong time – they get bullish and buy after shares have risen, and then panic and sell after they have fallen.”
Just as they did before the housing bubble burst and just like they did before the dot.com crash. And just like they have done throughout history.
The article notes that, “too many TV market pundits talk like they’re on ESPN. It gives the stock market a phony air of urgency and excitement.” And it reminds us that, “if you’re buying, higher stock prices are bad, not good.”
Wall Street lost more than 40% of our money -TWICE – in the past decade
How can you be sure they’re not about to do it again?
Dow 12,000 has been greeted with glee, even though the market first closed above that level on October 19, 2006. And I recently explained why the Dow would have to be at 27,000 – TODAY! – to give you just a 5% annual return since 1999!
The Wall Street Journal article points to four obvious reasons why the recent rise is “on thin ice”:
1. The government continues to print money and is borrowing $1.3 trillion a year from the future to jump-start the economy now
2. Debt – including government, household and corporate – is already at record levels
3. Housing prices are still falling and the jobs picture remains gloomy
4. China and emerging markets are experiencing raging inflation and fears are rising of another debt crisis in Europe
And here’s one more I’ll add that’s very frightening:
5. Consumer spending is up – which is helping to propel the stock market rally. The problem is that consumers are doing that by dipping into their savings. In fact, according to another Wall Street Journal article, Americans have dipped deeper into their savings over the past two years than at any point in the past six decades!
And, according to Bloomberg.com2, the saving rate in December decreased from 5.5% to 5.3% to support the buying frenzy. Only 35% of Americans have enough emergency savings to cover 3 months of living expenses according to a recent survey3.
So, it would appear that…
Many people have already forgotten the lessons learned over the past 3 years…
And even if you consider yourself a disciplined, intelligent investor, the reality is that you still suffer from the sins of the “stampeding herd” described above. The key to a secure financial future is to first build a financial foundation that is not dependent on risky, unpredictable, volatile investments.
That gives you the ability to weather life’s ups and downs and know you’ll still have a retirement income you can predict and count on.
The Bank On Yourself method gives you the peace of mind and predictability missing from so many people’s financial plan. And a $100,000 cash reward still awaits the first person who can show they use a different financial product or strategy that can match or beat the advantages and guarantees of Bank On Yourself.
If you haven’t already taken advantage of a free Analysis that will show you how you could have a nest egg that grows at a guaranteed and predictable rate and that never has a losing decade – or even a single losing day – request a free Analysis now, while it’s fresh on your mind!
What’s the biggest lesson you’ve learned from the financial crisis?
I know many subscribers have changed their behavior as a result of their experiences over the past 3 (or 10) years. We want to hear from you!
Tell us in the comments box below what’s the biggest lesson you’ve learned from the financial crisis and how you’ve changed your behavior as a result…
1. I started a BOY Plan last month
2. I started buying Gold and Siver 5 years ago
3. I don’t watch the news, but keep up on current events through the internet.
I no longer listen to the news. I have a plan and know what “I” need to do to be where I want to be. Stop focusing on your enviroment and start focusing on your actions to get to where you want to be. As long as you keep moving forward you will be where you want to be.
After bankruptcy I researched how to do better financially and came upon the Infinite Banking Concept and also received Bank On Yourself free just for the asking when it first came out. I have started a policy for $90000 on myself and am using it to pay off my car ( I had paid off my credit card just prior to starting) I plan to use it and start more policies on those I have an insurable interest in. Next will be opening a policy on my son.
This is the biggest lesson (interrelated) I’ve learned from the financial crisis:
1. Saving is not the same thing as taking your money and investing/speculating with it as risk capital in the stock market.
2. If you don’t know how to invest/speculate, you have no business being in the stock market, despite the ERISA law. See # 1 above just to be sure.
3. Financial education is one’s highest priority. The establishment won’t educate the sheeple.
4. One must understand inflation and the inflationary effects, and how the individuals in government and banking pull the wool over our eyes with it.
5. Don’t buy in a bubble. This presupposes you know what one is and when it occurs.
6. Don’t sell in a crash. This presupposes you know what one is and when it occurs.
Chad,
I currently have a boy plan..but still struggle with getting my head around the dividend rate of 4-5% vs the real inflation rate of 5-7%…notwithstanding all the other great benefits of a boy plan…am I not “getting behind”….your post seems like you have a handle on the big picture…ps…….after getting hammered in 2007…and now knowing the stock market is essentially rigged by and for the “market makers”…ie wall street insiders..i have zero equities…thanks for your input…
Matt in Los Angeles
I’d like to jump in here. You’d have to get 7-8% in a tax-deferred account (IRA or 401k, etc.) to equal the net return of a Bank On Yourself plan.
Two big advantages of Bank On Yourself include the simple fact that all return OF your money is more important than return ON your money.
And second – the growth is exponential (in the mathematical sense of the word). The longer you have the policy, the steeper the growth curve.
This blog post illustrates both points more clearly.
The biggest lesson I believe I learned from the last three years is that greed comes back to bite oneself in the end. I truly believe in capitalism but I naively thought that people wouldn’t take advantage of others, that the American spirit and the desire to help our neighbors would win in the end however we saw how greed and avarice blind people.
I am so thankful we recently got started with BOY. I’ve had a sense of urgency about getting started with it from the moment I started investigating it. I finally feel that we’re preparing for retirement wisely.
Thanks for your update Pamela. I’m sitting in Siem Reap Cambodia having enjoyed a wonderful trip her to see Angkor Wat and the other wonders of this areas of the Cambodian Kingdom and am very thankful for having moved in BOY several years ago. All I’m hearing on CNN is Egypt, Egypt, Egypt and reading the Economist their was a major feature on Tunisia. We are headed for a very rocky next few years given what you stated above + the unrest that is happening in the Middle East and Europe. Not to mention inflation protests in Asia. The next few years will be a test for BOY issuers like none we’ve seen in the last 70 years or so. I’m sure this is the way to go, just wondering where all the debt – personal and public, the food and fuel inflation, and the policies being enacted by the Fed and other central bankers which is fueling even more pressure on the fiat currencies of the world. Going to be an interesting ride.
Back to Singapore in a couple of hours. Things are nice and calm there but food inflation is quite strong. In China week after next will be interesting to see how much things cost.
Cheers
Bill
What I have learned is to get out and STAY out. I lost most of my variable annuity in the 1998-2002 decline, which forced me to take out equity from my house to live on (I have some major disabilities and cannot work). Now that, too has declined and I have only four more months of funds left to pay this evil mortgage. After that, I will lose my house; the mortgage company has been stringing me along, not really helping me at all. So, in the first place, don’t trust everyone, and don’t believe a person when he says he “loves” you, and then turns around and becomes hostile and abusive when you marry him, causing you to get “rid of” him (his words). Now I will soon have no home because I was a compliant idiot.
What have I learned? …. Pay attention to what the masses/herds are doing, what the mass media is recommending to the masses, and what convention wisdom suggests — then avoid doing all of that and find a better, lesser-known path to follow.
I am trying to keep an open mind regarding Bank on Yourself, but I have a question. I understand the insurance side, but my question has to do with the Spend and Grow Wealthy part. Whether I take out a loan from a bank or from my insurance policy, I am still making payments and paying interest. Yes, I am sort of borrowing from myself, but the car was paid with money from my policy which had to be put back. It is basically a loan from the insurance company, but with lots of flexibility. I would think that payments into a savings account in advance would be a better way to go. One thing about the insurance is that the money is immediately there if you need it and with no questions asked. I just do not see stacking up the savings on buying 10 cars. I have had to pay for all of them.
A big reason that saving up to pay cash for major purchases like cars doesn’t work as well as using the Bank On Yourself method is that when you pull the money out of the savings account to make a purchase, you are then earning ZERO interest on that money.
If you instead were to save up the money in a Bank On Yourself-type policy, when you pull it out to pay cash for something, it keeps growing just the same. (Caution – not all companies offer a policy with this feature. A Bank On Yourself Authorized Advisor can recommend companies that have all the policy features needed to maximize the power of the concept.)
In addition to the flexibility you get with Bank On Yourself that you mentioned, there are numerous other advantages and guarantees that you get with this method. I encourage you to compare paying cash against them.
Also, the return in a properly-structured Bank On Yourself-type policy will be significantly more than you can get these days in a savings or money market account or CD.
OK, I could probably make more on my money in a BOY plan for sure, but I still must pay back my policy loan with interest. BOY is great for emergencies, but I could probably get a better interest rate on my loan elsewhere. However I do a loan, I still have to make payments with interest to offset the money that went to car dealer. I understand how the loan does not impact my cash value, unless I do not pay it back. Nothing is free in this world. If I save up the money to buy my next car, then I pay no interest, but actually make some interest while it is building. Everything else makes total sense to me.
I’m glad you’re trying to think this through.
You say that if you save up money to buy your next car, you “pay no interest.” That’s not true: You finance EVERYTHING you buy because either you pay interest to use someone else’s money or you give up the interest you could have earned if you’d kept your money invested instead. This is a very important principle of finance they don’t teach you!
Also, keep in mind:
1. The interest rate charged on policy loans is typically below commercially available rates.
2. Low interest rates on cars may be available today, but will they in 5, 10 or 20 years? And what if you don’t qualify for a loan for some reason?
3. What happens if you finance a car and lose your job or hit a tight spot/emergency?
4. If you save up money in a savings account and pull it out to pay cash for a car (or anything else), you will still have to make payments into that savings account to build it back up to be able to use it again. Either way, you’ve got a payment to set aside each month.
When you make payments into a savings account, you’ll only start accruing interest again incrementally. With a Bank On Yourself-type policy, you earn the same guaranteed annual cash value increase and dividend on EVERY dollar you took out – even if you just took out $25,000!
This provides a unique antidote not available anywhere else I’m aware of to the “you finance everything you buy” principle described above.
5. You’ll typically pay taxes on the growth in a savings account or CD. The growth in your policy can be accessed tax free – if you do it right – under current tax law.
6. You get 18 distinct advantages and guarantees with Bank On Yourself. How many of them will your savings account give you?
7. Consider what some people do if they can get a lower interest rate than taking a policy loan: Put the difference you saved into your Paid-Up Additions Rider (the piece of the policy that grows most efficiently). If you hit a tough spot paying back your loan, borrow from you policy to do that and now you have the flexibility and control the policy offers.
What did I learn from recent events? Well it is better to be diverse! I now look at all possible scenarios I can think of and try to be prepared for most of them.
Most people have a SHTF scenario, with the collapse of the dollar…which leads to buying precious metals and such. Me well I am learning to grow most of my own food..build my own house(most of which can be learned at a community college cheaply) with all the thought of a “collapse” ok…well we all know you can’t eat metal or paper, but you sure can buy things other people make or grow with that currency.
So rest assured, and don’t worry about to all the doom and gloomers that say the sky is falling because your destiny is in your hands.
Also since we are on that note, if the government is so keen on inflating their way out of trouble, ok go ahead and make my day! Ill just repay them on their student loan debt with inflated dollars they created! Cheaper for me, and cheaper for anyone else who has some type of debt (house, car, etc).
Yes prices will inflate, but if you control your food and energy aka make yourself, you will be safe (take the savings and re invest in your BOY) while everyone else pays $10 for 1 tomato (so the doom and gloom goes)!
Great feedback, Will and very insightful!
No problem Pamela!
Another big reason I wrote that was to let people know what the greatest investment really is…and that is themselves, their family, and their communities!
I often know of no greater return on investment than their self in the form education. That is what attracted me to BOY the most, is the flexibility to grow through life right along with a policy of this sort.
And all things being equal, if inflation or deflation wiped ones savings out, they are still richer because they have more knowledge or experiences from which to work from.
To Dave Corde and Pam:
I know people hate to use numbers, so I’ll just do it here to show that BOY does result in a higher CV compared to the savings account after the car is paid off. BUT comparing BOY to using another bank, numbers-wise it should be the same if all things are equal. BOY just has some other benefits over bank.
We have to use the same variables for fair comparison. Assume somehow someway that after X years I have $10K in both of my BOY and savings account to borrow. One can argue that the savings should have higher amount but for this argument’s sake let’s keep things simple.
Let’s assume that the insurance company’s rate is 6% for a loan and that the interest plus dividends is also 6%. Payment term is 3 years. If I amortize this, that’s a $304/month or $3648/year payment.
Since the BOY is a non-recognition loan, my $10K will continue to grow at 6%:
Year 1: StartBal = $10,000, interest+div = $600 (6% earning); End Bal = 10,600
Year 2: StartBal = $10,600, interest+div = $636 (6% earning); End Bal = 11,236
Year 3: StartBal = $11,236, interest+div = $674 (6% earning); End Bal = 11,910
So after paying back my BOY loan at 6%, my CV is approx. $11,910. I’m leaving out cost of dividends buying PUAs too, so maybe it’s a little lower.
Now if I used my savings account with 2% earning (no taxes for simplicity), I’ll be paying back into it $3648 a year.
Year 1: StartBal = 0; Deposit: $3648; interest = $40; End Bal = $3688
Year 2: StartBal = 3688; Deposit: $3648; interest = $114; End Bal = $7450
Year 3: StartBal = 7450; Deposit: $3648; interest = $190; End Bal = $11,288
So savings account is $11,288. I do not want to get into the argument that savings should start with higher amount. Just showing if things are currently similar.
While I certainly see the benefits of a BOY plan over other forms of savings, there is still one thing that bothers me about what is stated in the book and on this site – that you can recapture money spent on cars and anything else if financed through a BOY plan. The implication is that you don’t lose that money at all … that the money used to purchase a car, for example, is also used to fund the BOY policy. If that were true, then the $30k spent to purchase a car should also be added to the cash value in the policy. But that is not what happens at all. Yes, you pay the money back to your policy, but the cash value has not increased by that amount.
While I certainly see the benefits of a BOY plan over other forms of savings, there is still one thing that bothers me about what is stated in the book and on this site – that you can recapture money spent on cars and anything else if financed through a BOY plan. The implication is that you don’t lose that money at all … that the money used to purchase a car, for example, is also used to fund the BOY policy. If that were true, then the $30k spent to purchase a car should also be added to the cash value in the policy. But that is not what happens at all. Yes, you pay the money back to your policy, but the cash value has not increased by that amount.
The difference is that the money is in your policy and you can now reuse it to buy another car, etc. The money is not really “gone” if it’s in your policy, is it? (That’s not the same as getting things for free.)
The problem with the way most people save up to pay cash for things in a regular savings account is illustrated in the graphs on pages 22 – 24 of my best-selling book.
See response to your comment above…
To Pam and tim01,
Nice presentation tim01. This also illustrates something critical. The hypothetical plan started out with $10k and after financing the car ended up with $11,910. So yes, I see the advantages of using the BOY plan in this way.
But the $10k for the car was not ‘recaptured’ and added to your nest egg. Your nest egg increased by $1910, not $10k. AND, you had to spend $10k from your job to pay back the loan. That money is gone.
Correct?
To Pam and tim01,
Nice presentation tim01. This also illustrates something critical. The hypothetical plan started out with $10k and after financing the car ended up with $11,910. So yes, I see the advantages of using the BOY plan in this way.
But the $10k for the car was not ‘recaptured’ and added to your nest egg. Your nest egg increased by $1910, not $10k. AND, you had to spend $10k from your job to pay back the loan. That money is gone.
Correct?