How to Invest Properly (The Herd Mentality)

The stock market is one of the most lucrative avenues retail and institutional investors turn for growth of capital. It can be seen as confusing and complex to the typical investor. What companies do I invest in? Do I invest more aggressive or stay conservative? The data investors use whether that be media, graphs, data analytics, etc. varies widely in influencing their decisions. Simply, there will always be up markets and down markets.

What about your typical American that is late on retirement planning? Your typical American that is tired of seeing low interest in their savings? Keep in mind the best investors capitalize on both ups and downs in the market. Warren Buffet has two simple rules when it comes to investing. I for one think he has a fairly strong track record. Rule 1: "Never lose money." Rule 2: "Don't forget rule #1." Index Strategies arguably have become the fastest evolving financial strategies in our economic climate. Consider the fact, historically we have a market correction every 10 years. That means with 60% of the US Stock Market consisting of qualified (with the IRS) retirement accounts, the majority of people are going to face a large correction in their retirement assets at some point. How do you feel about that? What if there was a way to continue growing out your 401(k) or IRA and not face the burden of these corrections? Would that be beneficial?

There tends to be negative connotations in our society around certain assets, and a herd mentality to accounts people are familiar with such as a brokerage account, 401(k), IRA, Roth IRA, etc. Do you think the wealthiest people in our country follow the herd mentality. Lets take the Roth IRA for example. Why is it beneficial? It allows tax free distributions in retirement, can access your contributions after 5 years, and take dollars out on a tax free basis. However, a Roth IRA like many others is a qualified plan. Qualified with who? The IRS. This means you can only contribute $6k a year and can not contribute once your income reaches a threshold of $120k. Lets think for a moment. We put billions of dollars as a country into savings with banks but never think about what they do with those dollars. Take Bank of America as an example. Where does Bank of America put 40 billion of their assets? The answer, cash value life insurance. Many of you may be thrown off to hear that but cash value life insurance can be not only a tax exempt asset from the IRS but when designed by a professional advisor, it will produce returns that outpace the stock market itself with no downside risk. How did Walt Disney found Disney World? Cash Value Life Insurance. How do my clients create a personal tax free pension every year in retirement, putting away 1/3 the amount of a 401(k) while spitting out more income? Cash Value Life Insurance.

I am not hear to be the insurance guy because honestly I view it as a portion to what you do with your overall portfolio. It does create the opportunity to access those dollars for real estate, college funding, traveling, starting a business, buying a boat, amongst anything you want. Millionaires and Billionaires often times pour large amounts of money into Cash Value Life Insurance as it is considered the "sacred tax-free cash cow". Do you have a tax free asset that can be accessed for opportunity as well as used for retirement? The herd mentality truly does hurt peoples finances and its fine to have many of these assets. Make sure you know all your options however because while you are putting money away past the match in your 401(k), people are putting 1/3 the amount into cash value life insurance policies; specifically indexed universal life and producing a larger asset that also happens to be tax free. Remember! Knowledge and literacy are key.