Comments on: A Brief Net Worth Update

By: KingTut57

KingTut57 — Tue, 22 Jul 2008 15:16:58 +0000

LazyMan,
You are right. The insurance policies are very confusing but if they are handled by someone that knows what they are doing, it is quite easy on us investors.

Whoever wrote that book must have had good timing in all the real estate he had been in. It can happen. Just tough right now. Like I have said on other boards, I think that real estate will struggle for 5-10 years.

By: Lazy Man

Lazy Man — Tue, 22 Jul 2008 07:19:38 +0000

I recently read a book, Millionaire by Thirty that talks about the life insurance investment as says much of the same things that you did KingTut. Unfortunately, I have looked into these policies and they are fairly confusing.

The book soured me on the idea as it started off with 50 pages or so about investing in real estate. In the book it seems, that real estate always appreciates and is great leverage. Unfortunately, someone trying the plan over the last 5 years would have lost money in many parts of the country (with no sign of making it back any time soon).

By: KingTut57

KingTut57 — Tue, 22 Jul 2008 06:34:54 +0000

Oh, I forgot to say that in my example the money averaged 25% annual yield for the previous 2 fiscal years, yet the amount in the fund is still the original $100,000 which is 0% return which is obviously negative when inflation is accounted for.

By: KingTut57

KingTut57 — Tue, 22 Jul 2008 06:31:02 +0000

Lazy Man,
As you know I am somewhat new to your site so I don’t know what you have your money wrapped up in. I had an excellent investments teacher in college and he tought us things different from the run of the mill investments.

Number one, he taught us that a mutual fund is the most over-rated investment out there. It’s one of the few investments you can own but not insure. There is a reason for this. Insurance companies know better is the reason.

Consider this. Mutual funds are constantly posting average yearly rates of return. Let’s overexaggerate here to make the math easy and the point obvious. Lets say you invest $100,000 in a mutual fund an 1/1/07. By 1/1/08 it has increased to $200,000 in an excellent year of course. Yearly rate of return after year one is 100%.

You leave that money in the fund. Now, on 1/1/09 it has fallen back to being worth $100,000 in a terrible year (which some people have had recently). This would equal a 50% loss in year number two.

So year number one showed 100% gain while year number two showed 50% loss. Average the two figures. 100%-50%=50%. 50%/2 years equals 25% average annual rate of return.

Many funds play this game especially newer ones. It is something I learned from some very seasoned investment gurus.

I’m sure you have had posts about it before, but some of the wealthiest people I know swear by whole life policies as the most best investment as far as risk vs. reward are concerned. Up front costs, yes. But guaranteed returns and strong running averages (close to 8% tax free which is close to 11 or 12% gross). I’m not getting off topic here, but if your money properly placed in such a policy you would avoid the rough times the market naturally goes through. I don’t have that much in it yet, but it’s actually gaining stronger than average right now as I’m being paid good dividends.

******I’m not starting a new discussion, just making a quick point.*********

By: Lazy Man

Lazy Man — Tue, 22 Jul 2008 04:46:35 +0000

I think people will still have plenty opportunity to call me an idiot ;-).

On a more serious note, if anything is a gray area, I usually ask the readers and they set me straight.

By: 2million

2million — Tue, 22 Jul 2008 04:40:26 +0000

I personally like the nakedness — as a blogger its a tough pill to swallow sometimes when you have a lot of people telling you your an idiot for doing this, that, or another. However it helps toughen my resolve and have more confidence in what I am doing each month.

By: jim

jim — Tue, 22 Jul 2008 03:38:55 +0000

Accumulating Money – I think that’s true, I stopped only because I concluded as Lazy just did… people aren’t really that interested in the number as much as they are interested in the ideas and plans you have.

Lazy – I agree with you, focus on what your plans on, what you’ve done, etc. Percentages are just as informative as hard numbers but without the nakedness. :)

By: Lazy Man

Lazy Man — Tue, 22 Jul 2008 03:19:05 +0000

There have been some tough markets in the past two years, so I’m not sure that it’s just that. Personally, I knew that my net worth wouldn’t be growing much when I focused on building lasting businesses full time last year rather than getting another 6-figure salary.

By: Accumulating Money

Accumulating Money — Tue, 22 Jul 2008 01:51:23 +0000

Maybe it’s just coincidence, but it seems like bloggers are suddenly less motivated to share their net worth now that the stock market is struggling and their net worth is shrinking instead of increasing.