The money aging factor, Pt. 1

By Paul Cross

Annuity National Brokerage Co.


It is often said, "If you want a higher rate of return, you've got to have some risk."

Does risk increase the rate of return or does risk increase the probability of loss? If risk increases the rate of return, why do high yield bonds often turn into junk bonds?

Another common statement: "You need to diversify to reduce risk." Now, think about that. If risk increases the rate of return, why diversify to reduce risk?

Some say, "Diversification is spreading the risk." Well, if that's true, does spreading the risk reduce or increase the probability of loss? My wife played two slot machines at the same time -- now that's spreading the risk -- and she lost her money twice as fast.

The old well established Financial Rule of 100 tells us to subtract our age from 100 and the difference is the maximum exposure we should allow to be at risk. That means that as we age, we should move more and more of our money to safety.

Here's a simplification: Do away with the math; your age is the factor. Your age tells you the minimum amount of your money that should be in guaranteed, safe, sure measures of growth, and as you age, move more and more of your money to guaranteed, safe, secure growth.

Businesspeople, sole proprietors and others work hard for their money and often take risks in their own business to make money. So why would you then risk losing your money by gambling in the casino, at the race track, and on Wall Street?

The two rules of a professional gambler:
    Rule No. 1 -- Get your money off the table.
    Rule No. 2 -- Play with other peoples' money and get their money off the table.
Think about that. Why would you let other people gamble with your money?

Here is my gambling success formula: In the casino, at the racetrack, and on Wall Street, gamble with no more today than you can afford to lose today.

The golden years of retirement now require more gold for many reasons including longevity and the ever-increasing cost of living a comfortable lifestyle that includes medical costs or the cost of self-maintenance.

Replace the risk factor with the safety factor and stop losing money to the IRS and Wall Street. University studies and economists around the globe have concluded that income annuities can provide a stream of income for life at a cost as much as 40 percent less than a traditional stock, bond and cash mix.

Now that's a discovery that will provide an income for life, however long, with continued growth on your money. Finally, we have educated knowledge that lets everyone enjoy a richer lifestyle without fear of outliving your money.

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