Missed Fortune Strategies
Source: Foreign Policy Blogs
We all know that the average inflation in the US is about 3%. Meaning that you will loose the value of your money by 3% yearly. So if your investment is averaging 9%, you will deduct 3% and you will end up with 6% gain.
So how can we reverse that process?
First, we need to understand how inflation works:
Now that you've seen how it works, we can properly create a strategy to reverse the impact of inflation.
- We know that inflation increase the value of goods and services that we buy to include the value of your house.
- Remove the equity from your house (inflation increase) and put it in a safe investment.
- Index Universal Life Insurance
- Guaranteed Floor
- No lost of principal
- Stable company with history of weathering down markets
- Predictable rate of return (PRR)
- Invest the equity with PRR minus 3% average inflation, minus interest rates, will equals to a positive cash flow.
Example:
Let's say you have a home equity of $10,000. You went to the bank and asked for a refinance and pulled out the $10,000 equity. Your new interest rate is 4% ($400). You placed your equity in an IUL with a guaranteed floor of .75% (do not put this in a variable investments) and a Cap of 13.5%. The stock market went up and down in one year. So let's say one year after you pulled out your equity and placed to an IUL it increade 8.25% in value ($825).
The math is that you gain $825. Subtract the interest charges of $400 that will equals to $425. Minus $300 inflation. Now you will have $125 left.
Warren Buffet rule #1 in investment is: Never loose money. Rule #2 is don't forget rule #1.
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