You obviously know I’m not a big fan of retirement plans. The inevitable question I get is, “If not retirement plans, where should we put our money?”
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If Not Mutual Funds, Where Should I Put My Money?
We’re going to talk about some good stuff. I’ll tell you the overall theme. If you’ve been on the show before, it’s all about prosperity. How do we create greater freedom and prosperity now, not 30 or 40 years from now? I want to talk about this quickly. This is going to be a fun topic. Many people have heard me talk about this, but many people haven’t. I want to make sure I address this one, which is if I’m not recommending people put their money into mutual funds, where should they put their money?
This is going to be a great one to consider here because it’s not going to be quite what you’ve heard before, especially if you’ve listened to mainstream media and most mainstream financial advice, it’s going to tell you to invest in mutual funds, and that’s pretty much it. That’s your only hope for prosperity and possible financial freedom. We’ll get into that later.
I welcome you to read the past episodes as well. You’ll notice that we’ll be on iTunes. On the website, you can download this through iTunes as well. I’m excited about that. I’ll let you know when that happens too. Feel free to check out our website for other great information, events, and things like that coming up on MoneyRipples.com. Make sure you check that out because there are lots of good updates. I’d love to write some great blogs on there, too, that lessons will inspire shows like this one. Let’s jump in.
Let’s talk about mutual funds. I want you to consider this as we get started. One, I’m not someone with a securities license where I’m going to tell you to invest in mutual funds anyways. I’m not the one to tell you whether you should be cashing them out. I’m not wanting to tell you whether you should be putting money in. What I’m looking to do is to open up your mind to other possibilities and also look at evidence of what’s worked and what hasn’t worked, especially over the last several years.
Mutual funds are funny because you have everybody telling you, “You should put money in mutual funds.” Even for people that don’t advocate mutual funds, that’s still the default answer. If you’re an American, put your money in your IRAs or 401(k). It’s always about putting money into some fund or something that somebody else controls and manages. It’s always some kind of financial product.
It’s been several years since I quit being a financial advisor. You have to understand that the things I’m talking about now are almost the exact opposite of what I used to teach several years ago. It was about eight years ago, in 2022, that I quit. I said, “I’m no longer going to be a financial advisor. I’m done. I can’t teach this stuff in integrity because it hasn’t worked.” If you look at the evidence around us, people are better off financially than they were 20 to 30 years before. Of course not. For people who are worse off or even paying off more debt, there is still more bond and people that have less savings.
There’s a lot more going on beneath the surface than what people are acknowledging. The fact is that most people will blame it on you. They’ll say, “You’re not saving enough. You’re not paying off your debt fast enough. You’re not working hard and not sacrificing enough. You’re being selfish.” It’s ridiculous. It’s funny when I see people comment, and they can spit out the typical type of stuff that comes out of their mouth. I say, “That’s awesome, but how has that worked? How has that been proven to work up to this?” If all of this financial advice has been so good, why hasn’t it worked yet? Why aren’t people better off financially? Even people that think they are better off don’t feel better off. What’s the problem?
No Financial Product Will Save You
I’m here to tell you that if you’re looking for a financial product on this show, especially on this episode that’s going to save you, I’m going to tell you something that you may or may not like. There is not a single financial product that’s going to work for you. There is no single financial product that will ever make you financially free. If there’s anybody that tries to tell you otherwise, they’re selling you junk. That’s it.
If they’re telling you that mutual funds are the answer, it is because they’re selling it. If they’re telling you, it’s indexed funds, universal life, or different types of life insurance policies, and things like that, they’re trying to sell you something. If they’re trying to tell you that it’s all about your real estate, they tend to try to sell you something, and that’s the problem.
One of the biggest things I’m trying to teach right here is that there is no one single product that’s ever going to save you. If that’s what you think is going to happen, you’re going to end up like everybody else who believes the same thing as you, which is getting the same results. The first time I realized this was about a year before I quit several years ago.
As I was listening to a guy teach, he was a trainer from one of the companies that we used for financial products. He started teaching us things about the stock market and average versus actual returns. For example, did you know that if you lose 50% in a year in a market, you’re going to find out that it doesn’t take 50% to make you back even?
What do I mean? Say you went from $20,000 down to $10,000 in your fund. If you make a 50% rate of return, 50% of $10,000 is only $5,000. You only got up to $15,000. In reality, if you lose 50%, you have to make 100%. You have to double your money after losing half of it in order to be back to where you started.
Think about that. In two years, if you’re trying to do averages here, negative 50 plus 100 is 50 divided by two years. That’s a 25% average rate of return in that scenario. This is why all the mutual fund companies and everybody talks about the stock market. They always deal with averages. They don’t tell you what you made. They tell you, “Here’s the average rate of return over the last 5, 10, 15, 20, and 40 million years.”
There are some funds that we were talking about. It was Pioneer Fund back from before the Great Depression that was still around. It was one of the few mutual funds that beat the market. If you think about it, if the market in the Great Depression lost nearly 90%, you would need about a 900% rate of return to break even again.
There is not a single finished product that's going to work for you. There is no single finished product that will ever make you financially free. If there's anybody that tries to tell you otherwise, they're just selling you junk. Click To TweetThink about that growth. You would have this massive positive number of positive average returns by the time you finally got back to where you started. A lot of you saw from Y2K all the way to the late 2000s. We saw two dips in one decade. If they show you a ten-year period, you think, “It’s amazing how good I’m doing.”
Even right now, people are thinking they’re doing great because the market hit a low in March 2003. You look at the ten-year average, and you’d say, “That looks pretty dang good.” You’ll even look at the five-year average and compare it to what it was in 2008 and 2009 now. You’re saying, “It looks good because look at that bottom that we hit.” If you’ll measure from the bottom and look up, everything looks great. Looking over time, you’ll start to realize, “If I was to make this X amount of dollars, wouldn’t I be better off?”
Dave Ramsey did a Twitter post that I often show in my events that says, “If you save $100 a month for the next 40 years at a 12% average rate of return in the market, you will have $1.14 million.” Here’s the problem with that. One is I did the math myself. It came out to be $979,000. Secondly, even if the best of the market’s average is 12%, the average does not mean actual. If you were to put your numbers in a calculator to see what you’d have in the market over the last several years, put in about 7.5% and that’s if you kept up with the market. You realize that most mutual funds don’t even get the average market returns.
Think about this. I’m looking at Yahoo Finance or the related news to the market because the market’s down 100 points now. It went down from a high. You see headlines like this. Stock skid before earnings. Triple-digit slide for Dow. Dow falls more than 100, drops below 17,000. The stock slips. Dow is holding 17,000.
High expectations for earnings. That’s contrasting news there. To see the market close to highs for years, strategist, growth mystery, jobs versus GDP, PE powerplay takes center stage, Boomer’s big bang impact on big pharmaceuticals. Chinese money looking for a home. Wall Street Journal celebrates its 125 years. All this stuff that you have seen. Rates aren’t going anywhere. All these kinds of headlines mean squat.
From my own experience, I taught people for several years how to trade stocks and options as well. If anybody used to be a fan of the market, it was me. I tell people to ignore a lot of the news because you’ll look at it one day, and it sounds like this. The next day, watch it happens tomorrow. You’ll hear the opposite news. You’ll hear things about oil prices declining or increasing, or you’ll hear about, “It’s better than expected rate market returns, or there’s an expected earnings report.” All of a sudden, the market will go up, and it’s like this weird, crazy thing. If you don’t feel like following the market, I would recommend not being in the market.
Most people recommend trying to be in the market, and they end up not understanding it or don’t follow it. They wonder why they feel lost and out of control. You cannot have financial freedom if you feel like you’re out of control. You got to understand that mutual funds, for the most part, don’t do as well. If they love the stock market, I’d rather have them trade their own stocks and options and try to go and let some money manager do it for them.
So Where Do We Put The Money?
I know that mutual funds can be a better option than doing nothing, potentially. I’m not promising that’s the case either, but that’s a possibility. If not in mutual funds, where in the heck can we put the money? I get a lot of clients, and they say, “We’ve got cashflow in control. You showed us how to find hundreds, if not thousands of dollars a month. This is great. Now, we’re starting to protect ourselves and be in a better financial position. We’re building emergency savings and everything else. What about retirement? How are we going to retire?” That’s a great question.
How do you understand retirement? We talked about this a little bit. We talked about some of these concepts. You can’t always think that it’s always about accumulating money to live off the interest. If you remember that from our last show, I recommend you read that. That’s a good first part of this. It’s not about living off the interest. That’s what most people do. That’s a slow way to create wealth. Usually, most people will never accumulate enough to live off the interest. If you’ve got to live off 3% a year like most financial advisors are starting to recommend now, the old school ones are still saying 4%, but the ones that are wise enough are saying no more than 2% or 3% because it’ll probably run out of money. If you have $1 million, you live off 3%, that’s $30,000 a year. That’s hard to do.
Some people still believe that the market produces 12% a year, which it doesn’t. If you believe that, you think you’re going to be set. If you were to use that same Dave Ramsey example, 7%, you would only have about $250,000 versus over $1 million, as he was saying. Living off 3% of $250,000 is not a lot. You’re a little off over maybe $600 a month.
I want you to look at it differently in the sense of what allows you to be able to retire and get to a place where you’re financially free. If you ponder that question, you’ll realize it has nothing to do with how much money you accumulate but everything to do with cashflow. How do you produce enough cashflow?
I want you to consider, instead of trying to accumulate money, where can we go for cashflow? When I recommend these things, I’m not selling anything. I don’t sell any products myself. I offer education and consulting. I worked with a whole team that can offer products and services like accountants, attorneys, investment people, insurance people, and people like that that can help you with this. The thing is, I don’t believe there’s any one product or one strategy that’s going to do it for you. It’s a coordination of using multiple ones.
First and foremost, especially those of you that are entrepreneurs. Focus on your own business first. This is a place where I think you should be putting a lot of focus on money. It doesn’t mean that you don’t save. Don’t get me wrong, but when you save, you save differently as an entrepreneur. Let me go to those of you that may not be an entrepreneur. Let me address you first because you’re not going to feel the same opportunities. If you’re not an entrepreneur and not putting money in, I would consider you to look at at least being an intrapreneur or an entrepreneur of some sort. We’re doing something more outside of the box.
Things that are financial products that could work, I like guaranteed things. For example, people that already have IRAs or 401(k) may be looking to roll something over into something better. My general rule of thumb is that you go for the safe, sure bet. Many people come to me and say, “I want to make a lot of money, and I’ll recommend things that are safer.” They might return a few percent a year. Maybe it’s 4% or 5% or a little bit more, which isn’t that far off the market.
You cannot have financial freedom if you feel like you're out of control. Click To TweetThey’ll say, “Chris, I want to make more money. That doesn’t seem exciting to me.” I’ll say, “You’ll see a lot more exciting than when you lose all your money.” I have one client in particular who made decent money, and he didn’t quite understand that at first, but he put the faith in for me to do it. We had to put places where money was safer. He stops gambling it. He had his money crossed overseas and things like that. We got most of his money in a place where it was controllable.
A year later, he called me up and said, “Chris, we need to talk.” I thought, “I hope it’s good.” He was a skeptical guy, and we hadn’t talked for months. I would get a little bit nervous when I haven’t heard from people for a while, and they say, “We need to talk.” He comes back and says, “Chris, I don’t know how you did it, but my net worth went up over $100,000. He was only making $130,000 a year.
He’s like, “Everyone is up over $100,000. It’s crazy. I don’t even understand it.” He inherited some money that year. He said, “If I will take that all out of my net worth, I still made over $100,000 extra. I attribute that to you.” I said, “I told you from the beginning that earning 0% is not your worst-case scenario. Losing more than 100% is.” Sometimes there is an investment you could lose more than what you put in. I’m sure some of you might’ve experienced that. I always tell people, “It’s always better to have that money there for sure. Have it liquid and available to use for other things in case there are better opportunities.”
Ironically enough, there was $250,000 he did not put with the guys on my team, and that $250,000, he kept with a friend that he’s known since the ‘80s. That friend ended up taking that money and blew it. He ran off the money and it was gone. He said, “The only money I’ve lost was $250,000. The crazy thing was the money that you guys were trying to get me to get out of there, and I didn’t do it” The one time he didn’t listen to you cost me $250,000, but he’s like, “I’m glad that we moved about $500,000 from there before.”
The point of this is for those of you that don’t have a business and who you want to put in safe places. Places like indexed or fixed annuities are possibilities. Whole Life Insurance is the only type of life insurance I usually recommend for most people. There are rare cases where universal life can be good but not for most people.
The Whole Life tends to be the sure bet and to guarantee that the money is going to be there and available if you need it. Problems with things like universal life insurance is that it’s not always available. You have hefty surrender charges and things like that in the beginning. I don’t recommend those kinds of things. I also recommend most people that sell whole life. Most people that sell whole life don’t understand how to use it as a way to create real wealth. That’s probably a whole new episode in and of itself, but whole life can be a great option.
Even if you’re a business owner, you’re looking for a place to store money that shelters it more from taxes. If you earn average, the strategy I use is people earn at least 4% or 5% on the cash inside there. What’s cool about that is at least 4% or 5% a year is tax-free and doesn’t have all the worries in the market. You’re then taking that money and using it elsewhere to invest. You exceed way better than you would ever do, like in a Roth IRA or things like that, if you do it right and you do it wisely.
Whole life can be a great option, especially if you’re looking to not make that the end. It’s a place to store money to be used elsewhere. Imagine using money and making money in two different places. It’s pretty cool. There are some great options there as well. I don’t usually recommend mutual funds because of the fact that you can’t ever have any certainty. They tend to perform a lot less than what they’re told they would perform.
Mutual funds are over promise and underdeliver, while whole life tends to under promise and over deliver for the most part. It’s the way the industry has its weird and wacko way. For those of you that don’t have a business, that’s one great option. For those of you that do, I mentioned some of these strategies. Some of these can also work, but I want to make sure that it’s all focused on how you develop and grow your business.
The reason I recommend whole life for people is that it’s a great storage place to keep money temporarily. That’s when you have extra overflow or when you’re looking to use it down the road. It’s great to store it there and use it later because there’s a lot more flexibility with whole life. It’s much like a savings account but tax-free and earns a much better return than a savings account.
I usually like people that put that money back into their business. Many of you have heard me tell that story about my brother-in-law where he said, “I could invest $10,000 with you in a mutual fund and maybe make 12%. That’s $1,200 a year, or I can take $10,000, put down payment on a semi-truck that I can turn around and sell, and make $20,000 in a few months. Chris, why would I invest my money with you?” That’s a great point.
If you can make more of your business, why invest in all these mutual funds and other people’s stocks? Why invest in all these other companies and not your own? It’s crazy that financial advisors are telling you to pull money out of your business to put it in somebody else’s. That’s ridiculous. It’s keeping your business. Carlos Slim, the richest man in the world, owns a Mexican telecommunications company. He even beat out Warren Buffett and Bill Gates.
Even he will say that every time he invests money outside of his business, he loses money. When he’s put it back into invest his business and making it grow and bigger, he’s made more. Maybe you’re at a point where you don’t want to grow your business more. You’ve got places you can put it and store it, but consider not looking there.
If you are at that point, you might look at other things like real estate investing. Real estate can be a great option, especially if you’re doing it more than the money. There’s an interest there. Look at it. I meet some farmers sometimes. A lot of times, they say, “Should I do real estate or stock?” I’m like, “What do you know about it?” He said, “I understand corn and crops.” I’m like, “Why not look at commodities? Why not look at doing that?”
I’ve known some farmers that are wealthy, not because of their crops but because they know how to play the trading game when it comes to commodities. They know how to play the whole price game of corn and things like that or hedge their risk with their own crops. That’s why it was created in the first place. It can be a great option, especially if you know and understand it, and you can love it regardless of the money. Do you have an interest in it or some passion behind it? That’s a great recipe for success.
There are a million ways to make a million dollars or more. Don't feel so stressed and trapped that you have to just go and invest in the status quo. Click To TweetFor example, if trading stocks and options seem painful to you, don’t do it. What would make that any different than having a job if you went and invested in that? You don’t have to do these things. Don’t feel pressured by people that try to sell you their own agendas to go invest in certain things. You don’t invest in things that you feel are best for you. Find a way to make them work.
There are a million ways to make $1 million or more. Don’t feel trapped that you have to go and invest in the status quo. Don’t feel like you have to go invest in real estate, even if it is a great option. It may be a great option for a lot of you, but don’t feel like you have to. Making 15%, 20% to 25% cash-on-cash type of returns on your money is awesome.
Here’s something to consider, too, when you’re looking to invest in stuff. I talk a lot about thinking like a bank because banks know how to do it better. Think about this. Banks are some of the best investors in the world. Are they not? Put aside the fact that some banks decided to over-leverage themselves, and they had to get government bailout money. Some of those guys were ridiculous.
Most banks, the ones that you don’t hear in the media, are the ones that are making big-time dollars on you. Some of them, for example, when they have extra money, what are they doing with it? They’re turning around, loaning it back to you. Who says you couldn’t become a lender yourself? I wish more people would invest like banks because banks don’t give money freely and easily. Some might do it in certain situations, but they’re still researching you to a degree, aren’t they?
They are looking at your credit scores, payment history, and how good an investment you are, not so much the money when they give you a loan for a car, even for a house. For some of you who have been trying to get a mortgage, think about how much information they’ve gotten from you. I have one friend that said they pretty much asked her for everything but her bra size. I had a laugh at that because it’s true.
I wish more people when they would invest, would spend more time doing that. Do you know that it’s funny that the higher the return that people promise, the less research that people will do on that investment? I’ve seen that to be true in my own life. I’ve seen clients of mine. They’ll say, “No, I don’t want to go for the sure thing. I don’t want to do whole life as a place to store my money. I want to go to this thing that’s going to pay me 25% or 30% a year.”
They’ll do a little research on it. They’ll lose money and get mad, but they’ll do all kinds of research, kick and scream about the things that are guaranteed. The thing is that you got to be careful about how your emotions are when it comes to money like this. Consider becoming a lender yourself if you could do enough research.
I remember asking somebody. I said, “I can’t keep you accountable. Will you join my program so I can know your finances and numbers? I can keep you accountable and make sure that this investment is successful.” She said, “No.” I said, “I’m not loaning you money because I can’t keep you accountable. I can’t control that investment.” I love having control because control creates more freedom. Look for different ways to do it. Lending money can be great, but make sure you’re doing enough research. You can become your own bank and think about what a bank does. A bank, when they loan money, do they ever loan money for a mutual fund?
Would you go into a bank and say, “I’m looking to borrow $50,000 to put in my 401(k)?” What will they say? Do you know it’s illegal? You’ll have to sign waivers when you do a mutual fund that says that you’re not borrowing money to put in the market. Why? Because banks know it’s ridiculous. That’s what happened during the Great Depression. People borrowed money to put in the stock market because they couldn’t lose. When they did, people lost their shirts.
Banks don’t want to do that. They’re not dumb and not going to put money in mutual funds. If they’re not going to do it, why should you? If they think it’s a bad investment? Why does everybody else in the middle class or even lower class think that’s a great investment? They’ll barely even lend you money to invest in the stock market and only lend you the money up to the point of what you have. If you start losing too much money, they call it to do. They’ll pull out all the money, and you’re left holding the bag.
Even then, they take very little risk. They don’t want to take any risks with their money, but you will notice that they do lend you money when it comes to things like business. They’ll give you a business loan, won’t they? They’ll research you and see if you’re a good investment. They will also lend for real estate. They know that too. Lend for those kinds of things. They won’t lend for things that are crazy. They won’t lend money to things that don’t work.
Where should you put your money? First and foremost is where you know a lot about it, and where do you have some passionate interest. Start there. I wish I could get an easy blanket answer for you, but if I did, you would know I’m selling you something. That’s why I’m not giving you a blanket answer. I’m the one guy that’s not going to be selling you things. This is why I am the Financial Advocate for the Entrepreneur because I’m telling you to invest in you, your education, your business, and investing in things where you can control it, and we can decide from there.
That’s why I do things like money leak evaluations and so forth, where we try to determine where you’re leaking money and what might be a good option for you. If you ever have an interest and say, “I’d love to know where to invest my money,” send me an email at Chris@MoneyRipples.com and ask. See if we can open up that conversation.
For the most part, if you’re here to learn to open up your mind, consider you don’t have to invest in mutual funds. That’s not the only option. There are so many places you can go and invest. The options are limitless. Don’t think it’s scarcity that you don’t have those options. Join us next time. We’re going to start talking about how to make money without money. It’s going to be a great show. Join us there. Make it a prosperous day. I’m telling you to go out, prosper and love your life.
Important Links
- Chris@MoneyRipples.com
- Bankrate.com
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