Why Some People Shouldn’t Invest

I have been investing since I was in my early 20’s and in this article, I want to share with you the truth about investing that most people don’t understand.

You see, investing is putting money out with the expectation of getting more money back in. And the key word there is expectation. I observe that many investors have wrong expectations completely when it comes to investing.

Why?

Because financial institutions have done a very good job of creating products and services that they make money off of and making it sound like they are “investments”. Well, I can tell you that the very best investments aren’t a profit scheme created in a boardroom anymore than the very best food out there doesn’t come from McDonalds.

In fact, food is a great example. If you want the very best in quality, organic food, it’s going to cost a little more money, it takes a little more work to create, and it is a little more scarce (go into the grocery store and look at how big the organic section is compared to the non-organic section). Investing is the same way. If you want truly good investments, it is really important to set the right expectations from the get-go.

I’ve mentioned before that the word “invest” at its root means “to clothe your money” and when I am clothing my money (or even my body for that matter) there are a few boxes I must check at the minimum:

1. I like it. If I don’t like the investment or the asset, it doesn’t matter how much money it makes me.

2. I understand it. If I can’t draw it on a napkin and explain it to a 10-year-old, I’m not doing it.

3. It fits me personally. Every investor has different traits with things they’re willing to tolerate, including risk, timelines, etc. It needs to fit me.

4. It serves my purposes. It ultimately needs to produce what I need it to produce. If I need passive income from my investments, I won’t invest in things that don’t generate passive income.

5. It is something vital. In a good economy, vital assets do well. In a bad economy, vital assets do better than non-vital assets.

6. It is not overpriced. There is a difference between price and value. I compare the two before I invest.

7. I control it. I need to have control over it with direct possession or tight supervision or I won’t invest.

Now, these may be the starting point, but there is an important rule to remember when it comes to investing and that’s this: There is no “perfect” investment.

One of Newton’s Laws is that if it can go wrong, it will. So, this needs to be considered as an 8th point.

8. I am willing to accept the worst-case scenario.

Let’s take gold for example as an asset. In the long range, gold has generated 8–10% annual returns and for me it meets all of the other points. However, in a worst-case scenario, I could lose up to 30% of my value by owning gold. I need to take an honest look at that and mentally simulate that experience and determine if I am okay with that downside. If not, I should probably consider not owning gold.

What about real estate? It’s all fine to look at all the upsides, but what’s the worst that could happen? Well, the tenants stop paying, I can’t kick them out for many months, have to cover the mortgage out of pocket, and they trash the place while living there, causing tens of thousands worth of damage. Or an unforeseen repair comes up and I end up coming out of pocket with much larger costs than I’d considered.

My point is that any good investor should correctly estimate what could go wrong, expect that it probably will and be prepared for it. If you can’t do that as an investor, then I would say investing probably isn’t for you.

Now, at this point, you likely think I’m crazy because if investing isn’t for you, what are you supposed to do then?

Use guaranteed strategies that have minimal downside and some upside.

It’s no secret that I am a fan of the Sacred Account, which is a life insurance policy that I utilize to become my own banker. I deposit money in, it grows for the rest of my life, I borrow against it, and use it to do things like pay off debt, make large purchases, and invest.

If I am someone who doesn’t like the idea of losing money, or waiting months on end for tenants to move in or pay me, or having to fork out $15,000 for repairs, then here is what I’d do instead:

1. Put as much money as I possibly can into my Sacred Account so it grows for the rest of my life

2. Borrow against it to pay off ALL of my non-mortgage debt. This is a guaranteed rate of return by avoiding interest. It frees up my income as well, allowing me to put more money back into my Sacred Account

3. Make all of my large purchases with my Sacred Accounts. This includes cars, furniture, vacations, personal development, etc.

4. Buy or pay off my house with my Sacred Accounts. That’s right. If you don’t like the worst-case scenarios with investing, paying off your house with your life insurance policy eliminates one of your #1 expenses in life and saves you plenty of interest dollars.

5. When I am ready to start living off passive income in my older years, move my Sacred Account into an annuity. An annuity is an insurance product and when designed correctly, it has little to no fees, it cannot lose money, and it can pay you a guaranteed income stream for life without variation.

Let’s say that over the years, you’ve managed to build up $2 million in your cash value (which isn’t far-fetched if you’re doing this strategy correctly). You’ve got no debt, you don’t have a mortgage, and you have recycled all of the dollars you possibly can through your Sacred Accounts. Well, you can now do a penalty and tax-free transfer of your cash value into an annuity and have that annuity start paying you guaranteed income for the rest of your life. For the sake of math, we can pretend the annuity will pay you 7% of your principal amount guaranteed for the rest of your life. Well on $2 million, that’s $140,000 per year. No risks, no fees, no worst-case scenarios to worry about, and you can essentially just go enjoy the fruits of your hard work.

I like this plan because the truth is, not everyone is cut out to be an investor. Some people simply want to live life and not have to put much effort or attention into their finances, but still have the ability to enjoy and use their money today.

The conventional retirement system doesn’t allow for this. They teach us to put all of our money in tax deferred accounts and give up control and access to that money for the next several decades. Instead of doing that, we are going to put the money in the Sacred Account and USE it today to create a wealthier life now. Wouldn’t you like to be able to travel with your family when you’re younger rather than wait until you’re 65? Wouldn’t you like to drive that dream car and finance it through your banking system? Money is meant to be used. So, you will maximally save, but you won’t defer it all until later. You’ll take loans and use your money, it will still grow while you use it, and then you’ll simply pay yourself back.

This also means you can work longer. If you’re enjoying life now, why “retire”? The greats in life didn’t. They found things they loved and did them well into their 60’s and 70’s and the truth is, this period of your life is when you’re most valuable to others. You have wisdom and experience that can be passed down and that is extremely valuable.

And when you are at the point where you want to slow down or stop working so much, that’s when you transfer your cash value into an annuity and turn it into a guaranteed passive income stream.

Honestly, I think this plan is way more doable for the average everyday person than the idea that everyone needs to be a real estate tycoon or an expert on investing.

I don’t believe in Wall Street, but I also don’t believe in setting people up to fail. If someone isn’t going to do well as an investor, rather than sending them back to Wall Street, this strategy gives them a simple plan to create a wealthier and freer life now and turn that into hassle- and worry-free passive income later.

Now, if you’re like me and you are interested in being an investor and you are willing to accept the worst-case scenarios, then the annuity plan really wouldn’t be for you.

In summary, I believe there is a true Blueprint to Financial Freedom and financial freedom doesn’t mean you have to invest in certain assets or even that you have to invest at all. It means you aren’t financially restricted and that you can freely live the life you want to live the way you want to live it.

Yours in Purpose, Wealth & Freedom,
Jerry Fetta

Founder & CEO of Wealth DynamX

My mission in life is to help good people build more wealth who will in turn use that wealth to make the world a better place. Concepts like the one I am teaching about today are tools and educating meant to help accomplish that aim. So if you’re a good person who wants to create a wealthier life and help make the world a better place and you’d like more information on how my company can help you achieve that, email Contact@WealthDynamX.com.

If you’re a follower of mine and have not read my book The Blueprint to Financial Freedom yet, that is the place to start. This book covers the specifics for each level in the various chapters and you can grab the book for FREE as my gift.

Click here to get a copy!

The Blueprint to Financial Freedom by Jerry Fetta

To Purpose, Wealth & Freedom,

Jerry Fetta

Jerry Fetta is the CEO and Founder of Wealth DynamX. He has achieved financial independence by the age of 31, built a multi-7-figure financial education and coach firm, was named an Inc 5000 Top 100 fastest growing financial firm in the U.S. and is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on hundreds of podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.

Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.

Learn more at www.WealthDynamX.com

(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)