|
Millionaire Income 12
Low-Risk Ways
to Build Massive
Streams of Investment Income
|
|
Volume I
Welcome to Volume I of MILLIONAIRE
INCOME: Once you understand the power of the information in Volume I, you will undoubtedly want to tap the phenomenal potential of Volume II. Volume II takes you from 10-20% investments to earning 20-50% on your investments and more with little additional risk. Volume I will show you how to turn a one-time investment of $10,000 into as much as $864,000 in 30 years; Volume II will show you how to turn $10,000 into as much as $3.8 Million or more! In Volume II, you will discover how to slash or even eliminate taxes on your investments, how to get margin at zero percent, how to trade with zero commissions, how buy securities below market, how to generate extra cash, and lots more. To see more of what you get with Volume II, take a look at the Table of Contents below. When you are ready to order Volume II, log onto the Internet and go to this website: http://www.LifestylePublishing.com/income.htm.
As we increase our client base, the price will increase; so, you may want to get your copy of Volume II as soon as possible. You should also consider joining the Millionaire Income Members Only website; it offers some tremendously valuable services and free gifts. Chapter 28 (included in Volume I and II) details most of the benefits and features you will receive when you join. The subscription price of the Millionaire Income Members Only website will also increase as we build our client base; so you may want to sign up for that as soon as possible as well. Fortunately, the members only website comes with a Lifetime Subscription Guarantee. So your membership fee will remain constant as long as you remain a member even when we raise prices for new members. Download both Millionaire Income volumes I & II here Before we get started, let’s briefly discuss what may seem like a frivolous question … even though it’s not! Why should you care about investing and investment performance? Maybe you make a huge six or seven-figure annual income … maybe you have a wildly successful Internet business or network marketing business … or maybe you won the lottery or received a huge inheritance. If any of these is your situation, then Congratulations! However, sooner or later that income or large balance will be gone if you don’t invest. Regardless of how much you make, you need to invest at least ten percent of your annual income if you want stability, diversity, reliability, and longevity of income. Investing, especially investing for income, provides sustainable financial security; it should be at least one of many streams of income every person, family, and business should cultivate. And if you don’t have a huge income or massive net worth, the concepts in this book can get you there if you simply do it and keep doing it.
SECTION I
BUILDING WEALTH Chapter
1: DOUBLE-DIGIT ANNUAL
RETURNS: Making High Returns On Your Money Year After Year If
you could earn a minimum of 10% return on your money every year …
regardless of the direction of the markets … with less risk than what
you are doing now, would you do it, … and more importantly, would you
be satisfied? If so, then you’re going to love this book! That’s exactly what this book delivers … you will discover how to consistently get at least 10% return on your money year after year primarily in the form of monthly income. But that’s not all … I will also show you how to boost that return by as much as 50% … how to buy almost every investment for 10% below the current market price … how to get paid extra cash while you wait for the right price to buy … how to use margin and pay zero interest … and a whole lot more extremely valuable tips, techniques, and concepts. If this kind of certain, reliable income excites you, then you’re in the right place. And don’t worry if you’re a complete novice … never invested a dime in your whole life … chapters four through nine are dedicated to the complete novice right down to the definition of a stock, how to pick them, how to select and open a brokerage account, and when to buy and sell. In chapters four through nine, I’ll cover everything you need to know about stocks, bonds, mutual funds, closed-end funds, options, and how to place the various types of orders. If you are an experienced investor, you might want to skip these chapters, but you should at least skim through them, because I’ve included a bunch of innovative concepts that will help you boost your returns. Even if you aren’t happy unless you are trying to get 50-100% growth on your money every year … even if that means you end up losing money most years … you may find the concepts in this book provide a fantastic base for you to fund your aggressive growth itch. You could invest 90% of your cash for high monthly income and use the income for risky growth investments such as mutual funds, options, commodities, or even betting on the horses. Then if your growth investments don’t pan out, at least you still have a reliable, steadily increasing income. Are you tired of trying to make your money grow?
Are you tired of getting excited when the balance goes up and then
depressed when it falls back below where you started? Is the balance of your investments roughly the same as what you put in
it … or worse? Would you like to discover how you can earn 10-20% return on your money
every year regardless of the direction of the markets? Would you like to buy your investments below market price?
Are you interested in discovering a way to build an income that exceeds
your salary? This book will show you all this and more. Better
still, you can do all this with less risk than buying mutual funds
outright and certainly less risk than buying and selling the latest
growth stocks. In fact, if you take advantage of my new online service,
I’ll even show you exactly what I’m doing, when I’m doing it, how
to get discounts on specific investments, specific opportunities to
supercharge your monthly returns, and a whole lot more. See chapter 28
for all the details.
This
Book Was Written for All Investors From the
Complete
Novice to the Full-Time Professional If you are new to investing … if you are just starting your career or even still in school … this is a perfect book for you. In the primer section of this book (Chapter four through nine), you will find a detailed overview of stocks, bonds, mutual funds, and other investment vehicles. If you are a veteran investor and are open to some new ways of thinking, this book is for you as well. This book presents a different approach to building wealth than most of the investment strategies touted over the last 20 to 30 years. Download both Millionaire Income volumes I & II here Have you ever heard these three pearls of conventional investing wisdom? … “Buy mutual funds and hold them until you retire.” “Buy stocks when prices are low and sell them when their price goes up.” “Buy bonds when interest rates are high, and sell them when rates fall.” Chances are you have if have spent more than about ten minutes reading anything about investing. In the next couple of paragraphs, I’ll briefly discuss each of these guidelines.
The
Incredible Secret About Mutual Funds The mutual fund plan is fine if you just want a way
to put your money away for the next 10 years or more and if you are
willing to pay some hefty fees every year to get average results. In
fact, the mutual fund plan can be a great plan if you just want to park
your money and ignore it … but you have to promise not to agonize
through the inevitable market drops … especially if you use an index
fund. Yes, I know over most periods in history, 80% of managed mutual
funds don’t beat the index funds (i.e., “the market”). I don’t
intend to show you how to beat
the market; I plan to show you how to more or less ignore the market. By the way, if you like mutual funds, even index
funds, one of my earlier publications, GROWTH
& INCOME: How to Build a Mutual Fund Money Machine will show you
how double or even triple the income from any mutual fund(s) you choose. We’ll explore the four types of mutual funds later, but here’s the one thing you need to know now … If you don’t pick an index fund, which typically has very low fees (0.2% for example), once you get a lot of money in the fund, that annual management fee gets big! For example, a 1.5% management fee on a $100,000 account costs you $1,500 per year (which is $15,000 over ten years assuming the balance doesn’t change); if your account grows to $1 Million, your annual management fee costs you $15,000 per year … Ouch! In fact, if you invested $10,000 in a mutual fund with a 1.5% annual fee, contributed $6,000 per year ($500 per month), and received 10% growth every year (not likely), you would have $1Million in 32 years (assuming you compounded annually). That’s not bad, but assuming your annual fees were charged at the beginning of each year, you would have paid a total of $160,792 in management fees! Without those fees, you would have reached a million-dollar balance by the 29th year (i.e., three years earlier). By the way, at 15% per year, you would reach the million-dollar mark by your 24th year (or 22nd year without the management fees). In this case, your total fees paid by the 24th year would be $120,706. Fees matter! Maybe you don’t care about a measly $120,000 to $160,000 in fees over thirty years, but consider you’re still paying over $15,000 every year once you reach a million dollars. If you stick it out another nine years and achieve a ten million dollar balance, you will pay over one million dollars in fees just during those nine years, and your management fees will now be more than $146,000 every year! This is why most millionaires usually hire personal managers or invest in exchange-traded funds or specific stocks and do not use mutual funds (except possibly low-fee index funds).
Mutual
Funds Are Expensive, But That’s Okay Since
They’re
not “Buy Low, Sell High” Either? And of course, the buy
low, sell high plan for individual stocks is tougher than it sounds
… and the commissions aren’t cheap here either. Then there’s the
time investment with all the research, monitoring of your stocks, and
hoping they’ll grow in value while the markets keep bouncing all over
the place. If mutual fund fees are worth it, it’s because of the time
factor of picking and monitoring your own stocks. Incidentally, if you
are using Dollar Cost Averaging with
mutual funds, you should realize you are not
“buying low and selling high” here either. Think about it; with
dollar cost averaging, you invest a fixed dollar amount each month or
quarter which means you buy more when shares are low-priced and buy less
when shares are higher-priced. Either way, you are still buying;
you never sell. So, you can’t be selling high. Of course, over the
long haul, dollar cost averaging will raise your average return on
investment, but that’s not “buy low, sell high”. Once again, the
way around this dilemma is presented in GROWTH & INCOME. Download both Millionaire Income volumes I & II here
Are
Interest Rates High or Low?
A
Viable Alternative
è
Cash In Your Pocket! In this book, we’re going to discuss an alternative approach. I will show you how you can get at least a 10% return on your money every year regardless of what the market does to individual share prices. By 10% per year, I don’t mean growth of share prices, I mean cash in your pocket! You will likely also get some capital growth along the way, and later in this book, I’ll show you how to buy your stocks for 10% or more below current market prices (which will automatically provide capital growth), generate some extra cash flow, and supercharge your annual returns. I’ll even show you how you can buy and sell stocks and funds with zero commissions.
The
Power of Income This book reveals a strategy for building wealth through the power of income. Think about this for a minute … Why do you go to work everyday? What magical event is going to let you retire some day? What provides you a feeling of financial security? What let’s you buy all the things you want and need? The answer to all of these is income. Maybe your magical income moment is the day you qualify for a company pension, but the current trend says you may not want to rely on that. Maybe your savior is Social Security. Counter to many alarmists trying to make a point today, my personal belief is Social Security will be around for a long time, but you probably will never get back all the money you put into the plan (especially since it will be taxed when you get it) much less get a good return on investment. Your 401(k), 403(b), and/or Individual Retirement Accounts (IRA) will probably set you free some day (if you are investing in one or more of these accounts), but more than likely, that will depend on decades of investing, when you want to retire, and whether or not you cash out on an upswing in the market. Even if you do manage to get out on an upswing, have you thought about how you’re going to turn your IRA, 401(k), or 403(b) wealth into income? If you keep all your money in growth, you have to sell shares to get cash for your living expenses. Once you sell your shares … you don’t have them anymore! Obvious I know, but it still seems to allude the masses. You could take your money and put it in a savings account, money market account, or certificate of deposit (CD). However, $1 Million in a 401(k) only generates $10,000 of income per year if you stick it in a “no-risk” savings account at 1% … of course, you can currently get around 4% in a money market account … which gives you about $40,000 of income per year. But what if rates go down again? Even if they don’t, can you live on $40,000 per year today? In ten years, that $40,000 will only be worth about $20,000 when you consider the impacts of inflation. If that’s all the money you need to live, then by all means, put it in super-safe investments such as savings accounts, money markets, or CD’s. It makes no sense to take on added risk for money you don’t need. On the other hand, if you manage to accumulate a million dollars, I doubt you will be content living on $10,000 per year. If you use the concepts in this book, however, you can turn that mythical $1 million balance into over $100,000 of annual income. Better yet, if you use the concepts in this book now, depending on your age and how much cash you invest, you could have an extra $100,000 income … or more … before you retire … regardless of what’s in your 401(k), 403(b), and IRAs. Incidentally, you can also use these techniques in your retirement accounts. Read that last sentence again; it’s an extremely important point!
The
Ultimate Retirement Plan Since we’re talking about retirement, I’ll give you my guidelines for what I consider to be the best approach to retirement: 1. Get as many checks coming in from as many different sources as possible. 2. Always reinvest at least 10% of your incoming checks. 3. Never spend your principal (a.k.a., “Don’t kill the goose that lays the golden eggs.”) I realize these three tenets are tough goals to
achieve, but this book will show you how to do it.
That’s all I’m going to say here since retirement is not really
the topic of this chapter; however, we’ll discuss it in more detail
later. Download both Millionaire Income volumes I & II here
Assets
do not create a wealthy lifestyle …
Until
you convert them into income! Getting back to the power
of income … If you have a mutual fund with $100,000 in it and it
goes up in value to $110,000, does your life change any? No. You might feel
richer, but you still have all the same bills and a fixed amount of
income to pay them. Your life doesn’t change until you take profits or
convert your wealth into income. If you have a 401(k) with $450,000 in
it, a mutual fund account worth $100,000, a house worth $350,000, a
thousand shares of a stock that has grown in value from $10 per share to
$110 per share, two cars, a boat, a cat, a dog, and three goldfish, you
would be “rich” with a million dollars worth of assets, but none of
it improves your lifestyle until you convert it to income. In fact, if
you used debt to buy the house, the boat, the cars, and the dog
(they’re expensive these days), and you have a fixed salary income,
you might feel trapped with the life strangled out of you as you watch
your paycheck disappear every month to pay the bills. Even if you get
paid bi-weekly, you don’t feel any better because you watch your
paycheck disappear twice every
month. If you have excessive income, however, things change dramatically. If you owned absolutely nothing but $100,000 giving you a paycheck every month at a rate of 12% return every year regardless of what the market does, you would have an extra $1,000 in your pocket every month. That could change your lifestyle. Even if you didn’t take that $1,000, but reinvested it instead, your income would grow every month. Furthermore, as market prices dip, that $1,000 extra cash could be used to buy more shares of the best investment opportunity at the time. Wealth is not about assets; it’s about income!
High-Income
Investing Let’s assume I can show you how to turn any monthly investment amount you choose into a monthly income of five times that amount within the next 20 years … what would that do for you? Would you …
The more your income grows, the more secure you will feel; you won’t have to worry so much about keeping your job. The ridiculous stuff you endure at work will be less stressful … especially when you start making more at home than you do at work. You might not care so much about that next raise or promotion, and you’ll have better control of your future. My personal goal started with $1,000 per month from investments; now, my goal is to exceed my salary income, and I’m getting closer to meeting that goal every month. If you’re investment income is $1,000 per month this year, next year it would grow to $1,104 per month (assuming 10% Return On Investment) and over $1,645 per month in five years. If you supercharge your returns using the techniques in this book and get 15% average Return On Investment (ROI), your $1,000/month income will exceed $1,160 in one year and $2,107 in five years. And just in case you’re curious, your income would be $4,440 per month in ten years. Of course, this assumes you don’t add any more money to your initial investment. If you added $100 month to the 15% ROI case, your monthly income would grow to $1,176 in one year, $2,217 in five years, and $4,784 in ten years. Just to put things in perspective, $4,784/month is $57,408 per year which is higher than the average annual income in this country, and your investment income continues to grow every month as long as you continue to reinvest or compound at least a portion of that income. Now, if you have been a growth investor for the last five to ten years, consider your performance. If you took your current growth portfolio and invested it all today at 10% “guaranteed” yields, would it pay you $4,784 per month … or even $2,217 per month? To get $4,784 per month off a 10% annual yield investment, your account would have to be worth $574,080 (or $382,720 at 15% ROI). Are your growth investments worth that much? Let’s look at a more realistic situation for the new investor.
Compound
Your Income Into a Fortune;
How
to Turn $100/month Into $544/month in 20 Years Let’s assume you start with $1,000 to invest, and you can add $100 per month. I can show you a mutual fund you can open with $1,000 and $100 per month that currently pays an annual yield of 12.7% plus growth potential; but let’s ignore the growth potential for now. If you invest using my techniques and only get 12.7% annual returns (in other words, you choose not to use any of my supercharging techniques), your monthly income will be $25.47. That’s not too exciting, but it is 25% of your $100 monthly investment. Assuming you don’t ever change your monthly contribution, in five years, your monthly income will be almost $108. Still not exactly financial freedom, but your account is now earning more per month than you are investing. So, let’s move ahead further … still without increasing or decreasing your monthly contribution … In 10 years, your monthly income will be $291; in 15 years, it will be $635; in 20 years, it will be $1,283/month; and in 30 years, it will be $4,793/month. Now, you’re getting there; that’s over $57,000 per year. What if we increased your monthly contribution as your salary grows? Let’s just increase your monthly contribution by 10% each year. In other words, the first year, you add $100/month to your balance. The second year you add $110/month. The third year you add $121/month and so on. In this case, your income with 10% ROI would be $158 after 5 years, $544 after 10 years, $3,683 after 20 years, and $19,640/month after 30 years. Compare the difference over 30 years: $4,793 with $100/month contribution versus $19,640/month simply by increasing your monthly contribution by 10% each year. That’s $57,516 per year versus $235,680 per year! The following table compares the two cases discussed above:
Obviously, this would be a pretty good model for
someone just starting their career. By the way, if you could get 15%
instead of 12.7% (very likely as your balance grows), your income would
be $9,748/month (or $116,980 per year). That’s more than four times
the average salary in this country today, and you aren’t doing any
work to get it. You could be walking on the beach, sipping Mai Tai’s
in the Download both Millionaire Income volumes I & II here Now let’s look at those of you who already have some money to invest. Let’s say you have $55,000. That’s close to the average balance in a 401(k) retirement account for today’s typical 55-year old. Let’s say you invest your $55,000 using my techniques in your 401(k), IRA, or taxable account; we’ll talk more about those accounts later in the book. The results are tabulated for three different average returns in the table below once again assuming you only invest $100/month and you never change that amount:
1 Admittedly, it would be very difficult (probably impossible) to get 20% average return on all your investment over the next 30 years, but 20% on some investments IS possible. In fact, I’m holding several positions right now, that are earning over 20% annual return on the amount I invested. I think you’ll agree, any of the monthly incomes in the table above after just 15 years is enough to change your lifestyle. If you invest your $55,000 in a growth investment, do you think you will have that level of income in 15 years? Obviously, if you have a lot more money right now than $55,000 you can invest, then you can generate much higher monthly incomes.
Growth
Investing versus Income Investing We’ve briefly discussed the advantages and disadvantages of growth investing and income investing. Let’s take a few minutes and discuss exactly what growth and income investing really means. In general, a growth investment is any security (e.g., a stock or mutual fund) purchased with the intent that the price of the investment will increase. Even the genre’ known as value investments are actually growth investments by this definition. The only difference is a value investment appears to be worth more than the current market price of the investment in the eyes of the investor; in other words, the current price is lower than it should be. Value investments typically have good ratios such as a price-to-sales ratio less than 1.5 or a low price-to-book value ratio. A growth investment, however, is typically priced fairly by the market, but the security is expected to continue increasing in price either due to popularity with the multitude of investors, demand for the products and/or services the underlying company sells, or key ratios such as the relative price strength. However, for a given stock, growth investing really means the company tends to reinvest its earnings in the company’s business in hopes of building the company’s market share for the product or service, reducing expenses, etc. Since the earnings are reinvested in the company itself, little or none of those earnings are passed to the investor as cash (typically in the form of dividends or return of capital). The growth investor accepts the risk of receiving no earnings on his investment directly in hopes of getting increasing price per share; this approach also has tax-deferral advantages. Bonds can also be growth investments when purchased while interest rates are high in hopes that the price of the bond itself will rise when interest rates fall; thus, the investor can sell the bond for more than he paid for it. However, bonds also pay interest (since the bond is actually a loan to the company, municipality, or government); thus, bonds are generally considered to be income investments. An income investment, on the other hand, generally
includes bonds, stocks that pay dividends, and mutual funds that invest
primarily to receive bond interest, mortgage interest, real estate
profits, or stock dividends. The primary feature that constitutes an income investment is the cash paid to the investor. A company that
pays its investors a dividend has agreed to share the success of the
company with the investors by paying a portion of the company’s
earnings to the investors (i.e., stockholders). A bond pays cash to the
bondholders in the form of interest. A Real Estate Investment Trust (REIT)
by law must pay at least 90% of its profits to the investors in the form
of dividends. Since a portion of the earnings of income stocks is paid
to the investors on a periodic basis, there is less money going back
into the business; thus, the share price tends to stay about the same.
Of course, the price of an income investment can fluctuate quite a bit,
but the income investor usually does not expect the price to continue
growing year after year as he would with a growth investment. Normally,
a bond pays interest monthly; income stocks and REIT’s pay dividends
quarterly; and income mutual funds pay dividends monthly; however, there
are many exceptions. There are, of course, many hybrids between growth and income investments. For example, lots of growth stocks pay a small dividend of one to three percent. Some mutual funds are “growth & income” funds that have a mix of growth stocks and dividend-paying stocks, and some mutual funds are “balanced” funds that have a mix of growth stocks, dividend-paying stocks, and bonds that pay interest. And as I mentioned earlier, bonds can be held for growth as well while they pay out interest. Generally, the longer the term of the bond (i.e., how long the underlying loan is designed to last), the more the price of the bond will fluctuate as interest rates change. Now, let’s consider some of the advantages and disadvantages of growth investments versus income investments. The table below summarizes the pros and cons of growth investing and income investing:
Download both Millionaire Income volumes I & II here Chapter
2: GROWTH OF INCOME:
How to Compound Your Income Into a Fortune
Growth
investing is important, but it should not be the foundation of building
your wealth! In my opinion, growth investing is not what it’s
cracked up to be. One of two things happens to the typical growth
investor: you either chase the buy
and sell timing frenzy month after month, or you buy
and hold. Either way, if you are fortunate enough to build a large
portfolio, a dip in the market a mere fraction of the bear market that
started in 2000 will wipe out years worth of growth. Sure, you can say,
“All you have to do is watch the market and get out fast when it
turns.” But will you? Most people didn’t get out in the year 2000,
2001, or even 2002. The first dip hit them by surprise; then they
thought, “It’ll come back like it always has before.” A year
later, things were only worse, and they thought, “Well, prices have
fallen so low now, I’ll just lock in my losses if I get out now; so,
I’ll just wait it out.” Now, in 2006, we’ve been on a one-year slow
recovery, and the markets are still not back to where they were at the I have bought and sold growth investments for years … I’ve dollar cost averaged in mutual funds … invested lump sums in mutual funds and held them for years … I’ve tried to time the buying and selling of growth stocks … even commodities. And I made money in most of my transactions, but it was like a roller coaster, and it still felt like I wasn’t getting anywhere. Then I got an idea … the exact same idea that worked for me back in junior high school incidentally … back before I learned so much about investing … I cashed in one of my mutual funds I had held for about four years, and started investing it for income … not the 2-3% dividend income you get from the S&P 500 stocks, but income investments yielding better than 10% and paying checks every month. This, of course, violated all the conventional wisdom that says, “Put your income investments in tax-deferred accounts (like IRA’s or 401(k)’s) to avoid taxes.” But an interesting thing happened. Suddenly, I had an extra $1,000 per month of income! And you know what? Things started to feel different! At that point, I could see an extra $1,000 of cash in my account every month. I didn’t have a stock that grew in value by $1,000 only to retreat in value by $250 the next month making me wonder should I wait it out or get out while I was still up $750. No, I still had my original investment plus an extra $1,000 in cash! So, I took my $1,000 of income and bought the best income deal that month. The next month, I had more than $1,000 of income; so, I did it again. In fact, I found a whole bunch of investment opportunities paying as little as 9% and as high as 16% year in and year out.
Even
if the market tanks, you won’t care! Think about that for a minute … if you are holding mutual funds right now, what are you hoping you will average per year over the next five to 20 years? Most of the market experts are saying the stock market will likely grow by six to nine percent over the foreseeable future. I can show you how to get a minimum of 10% every year regardless of how much the market grows. Even if the market tanks, what do you care? If you’re investing to build your income, and the income keeps coming in month after month, and the value of your original investment falls by 10%, do you really care? If you have faith in your investment, your income from that investment can be used to buy more at a discount (by the way this is not the “buying below current market prices” I mentioned earlier; we’ll talk about that later). Generally, these investments pretty much maintain their value or grow in value, and declines in market value tend to be temporary. So if you wait until next month … or next year … your original investment will likely be worth more than you originally invested.
If
your investment goes up in value, You now have an interesting dilemma … When your investment goes up in value, you have an interesting dilemma. You would still be earning 13% on your original investment, but the income generated might only be worth 10% considering the increased value of your investment. For example, let’s assume you bought shares at $100 each and the annual income was 13% or $13 per year. Now, assume your shares have grown in value to $130 per share; the annual income is still $13, but that’s only 10% of the new $130 share price. So, you have two options: (1) you can keep the investment that’s generating 13% on your money, or (2) you can sell your shares and buy something that’s currently generating … let’s assume 12% … annual income based on the new investment’s current share price. Let’s continue with the example. Let’s say a new investment is available at $100 per share and generates an annual income of $1.20 per share. That’s a 12% yield. Option 2 says you could sell your investment that is effectively paying you 10% based on the increased share value, and buy the new investment to get 12%. Did I lose you on that one? Let’s break it down and assume an initial investment of $10,000.
The key point in this example is you can sell an investment whose value has risen and purchase a new investment with a higher current return based on current market prices and increase the effective annual return on your original investment. In this example, we went from a 13% annual yield to 15.6% annual yield. This small difference is huge when you consider the power of compounding.
The
Rule of 72 For example, the Rule of 72 says if you divide the return on an investment into the number, 72, the result is the number of periods it will take to double your original investment. At a return of 13% per year, your investment will double in 5.54 years; at 15.6% return per year, your investment will double in 4.6 years. Consider this over a 20 year period, and the difference is huge. This is a really powerful trick, but it doesn’t
always happen, and it’s certainly not predictable. If we could really
predict where share prices were going, we could become multi-trillionaires
using the growth investing plan. Since nobody has ever been able to
reliably time the market and predict the future, and since I like
predictable stuff, let’s drop this for now. When I see it, I will
point out these kind of opportunities on the Millionaire
Income Members Only website. By the way, this is not how we get the
16-20% annual returns I mentioned earlier. I’ll show you how to do
that later.
So,
what’s your plan for the future?
Do
you have one? Download both Millionaire Income volumes I & II here So far, I’ve given you a rather hefty, albeit incomplete, introduction to my plan. What’s your plan? Are you planning to live on Social Security? Is your employer going to keep you employed until you’re ready to retire and then bequeath you a nice pension? Are you relying on mutual fund managers in taxable accounts and/or tax-deferred accounts (i.e., IRA’s, 401(k)’s, or 403(b)’s)? Do you own a business you plan to sell or expect to support you in retirement? Unless your plan is to live in poverty or to work until you die … which is really scary … sooner or later, you need to create income. This book will show you the most powerful way (short of creating a business) I have seen to do that. Before we get into the details of my wealth-building plan, let’s quickly discuss what I call the false promises of growth investing. You can buy a quality mutual fund and hold it for
10, 20, or 30 years. Of course, if you go with anything other than index
funds, as I mentioned earlier, you’re eventually going to pay some
outrageous fees. A 1% fee of $100 on a $10,000 balance may not seem like
much, but when you pay 1% per year on a balance of $100,000 for 20 years
… which comes out to $20,000 (assuming no growth … talk about an
oxymoron!) … those fees add up to a lot of money! The other buy and hold alternative is to buy stocks in quality companies and hope they go up in value. If they do rise in value, fantastic. If they don’t, you wasted years of opportunity to earn 10% or more my way. And what if you’re quality company goes out of business? Of course, you could buy long-term bonds, which
generate income every month (unless it’s folded back into the
“share” value such as with savings bonds), but unless you sell them
when interest rates fall, bonds are not a growth investment. And don’t
sell them when interest rates rise! Let’s say you adopted one or both of the growth
avenues presented above … stocks and/or mutual funds … and let’s
assume you were successful. Whether you did it in taxable accounts or
your tax-deferred retirement account, now you have a nice tidy
portfolio. You have to ask yourself two questions. First, did your
annualized growth on those investments exceed what you could have gotten
by receiving and re-investing monthly checks at the rate of 10% per year
or better? I’m telling you … monthly compounding on 10%+ annual
income builds up fast! A growth investment has to grow by 171% just to
match the performance of 10% annual income compounded monthly for 10
years. Over 20 years, the growth investment has to grow by 633%. Not
impossible, but not typical either. If you put $10,000 in your favorite buy and hold company, do you think it will be worth $73,300 in 20
years? I hope so.
How
to Create Income From Growth Investments The second question is “How are you going to create income from a bunch of growth investments?” I can hear the mutual fund investors now …
you’re saying, “I can tell my mutual fund manager to send me checks
every month for any amount I want!” And of course … you’re right!
But where are they getting the cash to send you the checks? The answer
is they are selling your shares. What if it’s a bad time to sell those
shares … prices are down? Not only is the concept of cashing in shares
to get cash “killing the goose that lays the golden eggs”, if prices
are down, you’re killing the goose even faster! By the way, if you are
interested in creating income from your mutual funds and/or ensuring you
do actually get solid growth and powerful returns on investment from
your mutual funds, you should read my book called, GROWTH
& INCOME: How to Build a Mutual Fund Money Machine. Check
the references section in Chapter 30 for details. There are only two potential benefits of growth investing over high-income investing that I can see. The first is maybe your growth investment actually will grow faster than compounded income investing. The second is tax deferral. Growth investments are tax-friendly … if you hold them for at least one year. The reason is two-fold. First, if you hold them for at least one year, your capital gain (i.e., the profit you made) is taxed at a lower rate. Second, you will not owe taxes until you sell your investment. So, if you buy shares in XYZ company, and hold them for 20 years, you won’t pay any taxes on the gain until the 20th year. Cool! By the way, you get the same treatment for mutual funds, but it’s not quite as good. When you buy shares of a mutual fund, you don’t pay taxes on the capital gains of the mutual fund shares until you sell them, and the tax rate is less if you hold them for at least a year (which you absolutely should!). However, the mutual fund manager is buying and selling shares in individual companies for you (which is why you buy a mutual fund in the first place), and you have to pay the taxes on the gains and losses of the company shares in the year they are sold regardless of when you sell your mutual fund shares. In a way, it’s kind of a double taxation. The dividends paid by the company shares in your mutual fund are also taxed each year just as they are in my high-income investing program. Of course, if you hold the mutual funds or use my high-income investing program in a tax-deferred plan, you won’t have to pay taxes until you take the money out of the plan … many years later.
How
You Can Still Reap the Power of Growth Investing Now, hopefully, you understand the power behind
income versus growth investing. For all the stated disadvantages of
growth investing and all the advantages of income investing, growth
investing does have merit and can be an extremely valuable addition
to your income-investment strategy. If you allocate a large portion of
your investment cash in income investments and place the rest in focused
growth investments, you can use profits from your growth investments to
build your income faster. For this reason, I provide highly targeted
“best of the best” growth opportunities and ways to increase your
cash on the Millionaire Income Members Only website in addition to the normal
income opportunities. In Chapter 29, I’ll present a complete money
management plan for building wealth that employs the best way to
maximize your profits through both growth and income investments.
Chapter 28 presents all the growth and income benefits of the Millionaire
Income Members Only website. Chapter
3: MILLIONAIRE INCOME: 12
Key Techniques For Building Massive Streams of Income I hope you have enjoyed our preview of MILLIONAIRE INCOME If you are interested in getting
both volumes
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
