Monday, September 6, 2010

What REALLY Happens to the Dollars You Invest?

What REALLY Happens to the Dollars You Invest?

When most Americans invest money in their retirement plans, they usually go the traditional route, whereby if the stock market does well, they could make unlimited gains. On the other hand, when things go south, the losses also are unlimited. Millions are still trying to recover from this reality as you read this. The second traditional option is to purchase a product that pays a fixed amount of interest, like a CD from a bank, for instance.

Then there is a little-known approach that links investments to a stock market index and earns interest based on the market’s performance – via that index. Since the money is not actually invested in the market, however, when things go bad, investors don’t lose anything. This option has minimum and maximum cap rates, but it keeps market risk completely off the radar.

The thing most people don’t really understand – and, for the most part, haven’t even considered – is whether, when they make gains or losses as investors, the investment companies who carry their savings do the same.  Say you buy a mutual fund, a CD, or an annuity and your money goes to “this place” called the stock market or the bank’s vault, do you gain when the market does well and the investment company/bank gains, and do poorly when the investment company/bank loses?

It would make sense to believe it works this way, but that’s not exactly what happens. Will Rogers once said, “The problem in America isn’t so much what people don’t know; the problem is what people think they know that just ain’t so.”

You see, when you put your money in a bank or any other investment company, they use that money to undertake business ventures they believe will enable them to make money. And I’m talking serious cash, w-a-a-a-y more than you have probably ever imagined.  Now, since they have your money, there has to be a mechanism that gauges how much they have to return to you at any point in time, right? This is precisely where direct stock market investments, linking strategies, fixed interest, and a multitude of other strategies come in to play. Think of them as contracts (the key word being contracts), because in a very real sense, that’s EXACTLY what they are.

Again, these contracts are used to determine how much you have a right to claim of the investment you made. I know you are smart and starting to see the big picture, but please think about this for a moment. Do any of these companies or banks exist to lose money in an unpredictable stock market? Have you noticed that, for the most part, the SAME investment companies offer various types of investments – again, I call them contracts? 

None of our clients lost any money during the recent economic tsunami. What’s most interesting, though, is that the EXACT SAME companies (and I mean the same everything) in which our clients invested their money have many other customers whose contracts lost the better part of their life savings. Interesting, isn’t it?  The reason being is that these companies offer options, just like you’d find at a clothing store or a car dealership. So some of their investors’ money is more protected, while others have a much greater risk.

So How Come Everyone Isn’t Aware of These Choices?

I wish I had the crystal ball on this one, but I don’t. All I know for sure is that these options exist. The caveat is that not all companies carry every contract/option – just as in almost every field. May I therefore humbly suggest that you consult with a qualified, independent financial professional who knows what he/she is doing and, more importantly, is also honest to the core? Because from what I’ve seen, that’s the only way you can be sure you’ll be presented with all the choices available so that YOU can determine what will work best in YOUR circumstance.

Rather than worrying about how your investment company could be protecting your money while the majority seems to be hemorrhaging cash by the second, focus instead on making sure you are dealing with a LEGITIMATE business and that you have an ENFORCEABLE contract (notice the word contract again here). A truly independent and honest financial professional is indispensible when it comes to making sound decisions for your future.
Call Laser Financial Group today at 301.949.4449 (or visit our Web site) to set up your confidential, complimentary appointment with an honest, independent advisor who can give you a new perspective about your investment options.

No comments:

Post a Comment

Chime in with your comments or questions: