Investors are always looking for the next best thing; the best investment to make now. The absolute perfect strategy to enable them to build wealth, stockpile some money and watch it grow to suit their needs and desires.
At the outset, we want to pose that the best investment you or anyone can make is in yourself. Personal growth is the key to living a life of purpose. From here you can reach any goal you set for yourself, as long as your foundation is solid through the never ending pursuit of personal maturation.
Now, if you talk with an investment advisor, you’ll likely hear them say that one size does not fit all. They’ll be quick to point out that different needs require different options. Some are looking to save for college funding purposes, while others have 30+ years to save for retirement.
So how is it that we can clearly state that there is one best investment? Let’s take a look.
Best Money Investment to Make in 2019
Every investment has enemies – forces or laws that minimize gains or strangle growth. Some investments have many enemies, and others have very few.
The best investment strategy is one that manages to accomplish your needs in the most efficient way possible.
What do I mean by efficient? Think of investing like a war. If your army has to fight battles on six different fronts, against multiple enemies with a variety of strategies and strengths, your army is likely very inefficient.
On the other hand, if your army can fight just one enemy, on one front, with one strategy, you can use your forces in an incredibly efficient manner.
So what is the best investment?
Answer: The best investment, the one that is most efficient, is the one that is battling the fewest enemies.
The 10 Enemies of Investments
Now let’s discuss the top 10 enemies to any given investment. Look at your various investments and see how many of these enemies you are fighting.
Keep in mind that not all enemies are equal. They don’t all do the same amount of damage.
But ultimately, those investments that have to fight the fewest enemies, will end up being the best.
1. Time
This is an obvious one of course. All investments will have to fight against the element of time.
For those investors that decide to wait until they are 55 to start saving for retirement, they will become aware of this enemy all too quickly. The enemy of time becomes stronger and stronger the longer you wait to fight him.
Now, for those that choose to start fighting him in their early twenties, the enemy of time will appear to be far less capable and strong. And by the time the early investor reaches retirement age, the enemy of time will likely have been defeated altogether.
Avoiding the enemy of time is not really an option. The best way to fight the enemy is to start fighting him early in your life. However, it does bring up a good discussion point for any would-be investment.
The long-term average growth rate of any investment is the key weapon against the enemy of time. Many will quote Warren Buffet and his “Rule #1 – Never lose money,” as the best way to fight the enemy of time. There are many weapons, but ultimately you will end up fighting this fight one way or another.
Start young. Using life insurance as part of a personal self banking strategy is one of the best retirement investments you can make.
2. Lack of Liquidity
This enemy may catch you off guard, but again it should be plain to see. When you use your money to acquire something (an asset, a portion of a company, an insurance contract, etc.) you are giving up the ability to use that money to do something else for a period of time.
This is the opportunity cost of using money for a given investment. Some investments require a long term commitment, and offer very little recourse for those that have a change of heart down the road.
Keep in mind that a lack of liquidity is one of the enemies of your investments and that those that ignore this enemy may find that they struggle with their investments at the most inopportune times – during emergencies.
One of the pros of infinite banking is that you have access to your funds and still can earn interest on your cash account as if you never touched it.
3. Fees (or) Costs
Another obvious enemy here is the cost of any given investment. Mutual funds and financial advisors have associated fees.
Real Estate Agents charge a commission when helping in the transaction, and even if you buy property that is sold by the owner without the agent, there are escrow costs and mortgage financing fees.
Almost all investments have recurring costs associated with them. If you are a property owner, there will be recurring maintenance costs.
If you have a fund manager or financial advisor, there is likely an annual fee that is proportionate to your investment value (so the cost rises when your investment value rises).
Some investment-like options, such as using life insurance as an investment vehicle, have costs that cover the insurance (the death benefit) but very little in terms of management.
If you are looking at a variety of investment options, make sure you consider the cost over the life of the investment, because a 3% annual portfolio management fee on your $20,000 IRA account may not seem like a lot (only $600). But that same 3% annual fee when your portfolio hits $500,000, is quite a different story ($15,000).
4. Taxed Contributions
Everyone knows there are two guarantees in life – Death, and Taxes. So it’s no surprise that another big enemy of investments is taxes.
When you contribute to, or buy, your investment there are taxes to pay on that money. If your investment can avoid paying taxes on the money you use to purchase it, this enemy goes away.
For example, any investment that our government considers to be “qualified” is one that is tax advantaged. This means that the money you use to buy the asset is not taxed, until later.
Keep in mind that these are not tax free, because you will pay tax when you sell the asset and receive the gain (or in some cases when your account receives a gain you will be taxed annually on that gain).
However, being aware of certain incentives in the tax code, such as IRS 7702 for life insurance, can greatly enhance your portfolio.
5. Taxed Growth
Similar to the enemy above, there are some investments that are taxed on the growth. If you own real estate and sell it, you will pay tax on the gain.
If you own a stock and you sell it, you will owe tax on the gain (if any). This enemy is hard to avoid, and you should be aware of the tax implications for the growth of any of the assets you seek to put inside your portfolio.
I only know of a few ways that avoid this enemy altogether. There is the Roth IRA, but of course that has income limits and maximums.
But there is also the cash value life insurance products that grow without the tax implication of most other assets. I personally prefer the dividend paying cash value life insurance suite of products, more on this later.
6. Taxed Survivors
This enemy is probably one that most people don’t even consider until they’re fairly wealthy. The enemy is the tax to those that inherit the asset.
In other words, if you have a 401k plan portfolio and you die, what sort of tax consequences will there be for your heirs? The tax man will come knocking on the door of your heirs if you have specific types of investments.
7. Contribution Limits
Some investments have minimum or maximum limits on the amount you can contribute in a given period of time. A maximum contribution limit (Roth IRA) can be a serious enemy to your investment goals because it can be hard to grow your account while contributing such small amounts each year.
Don’t forget about the first enemy we discussed, the enemy of Time. If you have maximum contribution limits, you will struggle against the enemy of time.
In addition, there are some plans that have IRS mandated minimum contribution limits. While it’s true that you don’t want to typically be playing near the minimums if you have any serious retirement goals in mind.
It’s also true that the minimum could be a challenge if you have a specific life circumstance that makes contributions difficult for a period of time. All in all, it would be best if you didn’t have to deal with contribution limits at all.
8. Required Withdrawals
This enemy rears it’s ugly head on all those “qualified” plans we talked about earlier (401k, IRA, etc.). The tax man wants his share of your money, and he doesn’t want to wait. That’s why some investments have a set date (usually age 70.5) when withdrawals must start.
And these 401k withdrawals are taxed, and the amount that comes out is mandated. Not ideal is it?
For some this enemy isn’t that big of a deal because their retirement plan already incorporates significant withdrawals prior to this age. However, the enemy exists and will not be friendly to those that are caught unaware.
For those that don’t meet the required minimum distribution (RMD) they will be taxed a hefty 50% of the amount that they failed to withdraw. Keep in mind that not all investments have to deal with this.
9. Creditors
Do you own real estate? Is it in your name? If so, and you get sued by your creditors, that asset may not be safe.
Do you have a Roth IRA? SEP? 403b? These plans are not safe from creditors in most states.
For many investors that handle their finances above the board in an ethical manner, it may seem like worrying about creditors is something for the shady people only.
But an injury or illness, or an act of God or a terrorist, can quickly change your financial situation.
And when your financial situation changes drastically, it may be too late to change things so you need to plan your estate accordingly. You may be thankful that your assets and investments are out of reach of the creditors.
The creditor enemy is one that very few investors think about seriously, but when the enemy appears, it is often too late to do anything about.
Most investors find themselves in survival mode, just treading water and hoping that things don’t get worse.
If your asset is insulated from creditors, you’ll be in a much better position to handle most emergencies.
Cash value life insurance creditor protection is available. And if you are in specific states, your cash value is 100% insulated from creditors, even if you have filed bankruptcy.
10. Risk
Most investors assume that guarantees are impossible to acquire. But it’s simply not true. If you invest in a CD at your local bank, I’m sure you’ll feel fairly comfortable with the fact that the bank will indeed honor the contract. That is a guarantee.
And there are others out there as well. The enemy is the opposite – NO GUARANTEE. In other words, swim at your own risk (as you see the sharks approaching).
Real Estate is a risk (as we all saw in the last crash). Stocks are risky. Dividends are not guaranteed (although many have a long track record). But some investments are guaranteed.
As an example, Life Settlements are guaranteed, contractually. The time frame for Life Settlements is unknown to some degree, but the amount of money returned is guaranteed in the contract.
In addition, there are certain insurance products that have minimum guarantees and make for the best low risk investments.
Often times these minimums are fairly low, but they are contractually guaranteed.
Wouldn’t you rather have a guarantee in a world that is full of so much risk?
Best Investment Conclusion
As I mentioned earlier, the best investment is the one that can meet your goals in the most efficient way possible. Efficiency is measured by the number, and strength, of the enemies that the investment is fighting.
There isn’t any one investment that doesn’t have to fight any of the enemies listed above. All investments fight the enemy of time, and most have a cost associated with them, along with some impact on liquidity.
But there are some investments that fight very few of these enemies, and as such have managed to be some of the most efficient options on the market.
CVLI
As an example, properly structured cash value life insurance that is purchased from a mutual company, is one that has tremendous liquidity, low cost (majority of the cost is buying lifelong level insurance – not to be compared to term), no tax on the growth of the account, tax free loans, tax free withdrawals (up to basis), tax free to survivors, no contribution limits, no required withdrawals, is free from creditors, and has minimum guarantees.
So what enemies does cash value life insurance fight?
Time, Costs, and Taxed Contributions. Time is inescapable, costs are very low in a properly structured plan, and the fact that you have to pay for the asset with after-tax dollars is the price paid to receive the tax-advantaged growth.
Evaluate your own investments and assets using the list of enemies above. How does your portfolio stack up?
Do you see your investments fighting battles with a lot of enemies on multiple fronts?
We’d love to help you evaluate your options. Contact us today and we can help point you in the right direction.
