Protect Compound Growth, Business Insurance Hack and a Giant Earnings Week for Tactical Model Stocks.
Dynamic Growth: Compound with a Beefy Offensive Line. (Click to Watch)
Albert Einstein once said compound growth is the 8th wonder of the world. I don’t disagree. It’s a beautiful sight to see; an explosion of growth after years of interest producing more interest and growth-producing more growth. If only everyone could experience it.
Why doesn’t everyone experience it? Many investors who start out with good intentions to accumulate wealth are never able to truly benefit from compounding growth. This unfortunate fact has less to do with the performance of their investments and more to do with how they constructed their accumulation plan. Since 1972 to present, the U.S. stock market has averaged roughly a 10% return. See for yourself at www.portfoliovisualizer.com. A $10,000 investment in the broad U.S. stock market in 1972 would be worth approximately $1.6 million dollars today. On paper, a 10% return will certainly compound over decades.
However, life doesn’t happen on paper. For the $1.6 million dollars to be realized, an investor would have to stay invested, undisturbed, in the stock market. The main ingredient in compound growth is time. When cash flow gets tight, when vehicles break down, when the unexpected happens, the lure of raiding investment accounts is often too tempting for many investors. Every time they raid their long-term investment accounts to pay for life’s curveballs, they delay the miracle of compound growth. If they raid that account several times, they become highly unlikely to ever experience the massive growth that has lured investors to the market over the past 100 years.
Beef Up Your Line
Tom Brady has won more Super Bowl rings than any other quarterback in NFL history. Imagine if Tom was asked to accomplish the same feat without an offensive line. He wouldn’t win a single game. Starting a long-term investment account without protection from life’s unexpected expenses is the equivalent to playing quarterback without those big hulking offensive linemen to protect you.
In the world of investing, we don’t use offensive linemen, we use emergency accounts. Among our dedicated reader base, there are some of you who at this point in time may be saying, “Nate, I put 15% of my paycheck into my retirement accounts each month, I don’t have any additional money to build an emergency account. “
It requires no extra money
Building an emergency account requires no extra money. It should be part of your savings plan. We recommend building an emergency account that provides at least half of your annual income. Here’s how you do that. Let’s say your savings rate is 15%. This means every paycheck you receive you put 15% into savings and investment. Instead of putting the entire 15% into long-term retirement accounts, consider taking 5% of it and routing it into an emergency account. Once you achieve 6 to 12 months of living expense in your emergency account, you can reroute that 5% back into long-term investments.
Result: When life’s unexpected expenses come up, your emergency account can absorb those expenses and protect your long-term investment accounts from having to be accessed. Preserving the miracle of compound growth.
We believe our short-term income strategy is a great fit for a portion of an emergency account.
3 Tips for reducing insurance coverage for contractors (Click to Watch)
Contractors, ranging from carpenters to excavators pay insurance premiums based on their exposures. Insurance companies charge contractors rates based on 1) a number of employees and subcontractor costs, 2) tools and scheduled equipment, and 3) vehicles and trailers (if any). In a recent video, Macy addressed three ways in which contractors can use this information to lower their annual out-of-pocket insurance costs. If you are a contractor and would like additional insight on how to reduce your insurance cost to efficiently protect your business don’t hesitate to contact our office for a free quote and review.
