The Folly of Chasing Returns (part 2)

The Folly of Chasing Returns (part 2)

From my last column, we know that three important questions must be asked in comparing returns among various investments. First, we discounted the returns by the costs/fees associated with them.

Question #2 would be:

Is this return/interest before or after any applicable income taxes?

I like to call this the tax efficiency of the return. If you think about it, it is possible for the investment that generates the most money (the largest literal balance) to end up having the lower spendable dollar-for-dollar income after applicable taxes, isn’t it?

By way of a quick example, if the after-cost returns for Investments A and B were 7 and 5.5 percent, respectively, many folks might be tempted to quickly go with A. However, that could end up being a mistake if the investor neglected to look into their tax efficiencies.

Let’s say the investor in question happens to be in a 30 percent marginal tax bracket, and Investment A’s income were taxable, while Investment B’s was income tax free. That would shave off 2.1 percent (7 percent multiplied by the 30 percent tax rate) from Investment A’s return, leaving a net spendable income of 4.9 percent. Obviously with this new information, Investment B’s 5.5 percent would be the superior choice. But you’ve to realize how we got here.

This may seem like a pretty straight-forward, obvious step to take, but I can’t begin to tell you how many retirement investors have been (and are today still being) led to compare return options without considering the applicable taxes. At the end of the day, irrespective of what your financial advisor thinks or believes, the fact of the matter is that what should matter most to you is  how much of your earnings you’d actually get to spend – after taxes.

We’ll discuss the third question in the next column.
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Contact a professional at Laser Financial Group who has the real-world experience to help you answer the most important questions you can ask about your retirement plan. Set up your complimentary, no-obligation consultation and learn about your options for creating a retirement plan that's tailored to your needs and goals. Call us TODAY at 877.656.9111 or visit us on the Web at LaserFG.com.

The Folly of Chasing Returns (Part 1)

The Folly of Chasing Returns (Part 1)

Undoubtedly, our overarching reason and motivation for investing our money is to grow it. This is why the return/interest we might receive is one of the first things we consider when reviewing possible investment choices – and rightly so. However, many American investors have been fooled by comparing returns in a vacuum, so to speak.

Let me use this story to illustrate: An investor is comparing two options. Choice A quotes 5.5 percent interest while Choice B’s quote is 7.5 percent. To many, this may seem like a foregone conclusion, an easy choice. But when it comes to returns on money, you should never, ever forget the old saying: The devil is in the details.

In my opinion, there are three very important questions you should be asking when you see prospective investment returns. First would be:

Are these returns quoted before or after any fees associated with this investment?

I’m sure that even the world’s most novice investor would not expect his/her money to grow by any fees associated with his/her returns. Therefore, all fees must be discounted from any returns associated with your portfolio.

Now, let’s continue with our example. Choice A’s 5.5 return was after fees had been subtracted. However, Choice B’s 7.5 percent is the gross return, before it’s 2.5 percent fee. So 7.5 minus 2.5 equals 5 percent. Aha! Being the math genius you are, you can now see that Choice A is better than B, all other things being equal.

Keep in mind, whenever you see those interest rates being quoted left and right, you must make sure that you level the playing field before you make any comparisons or choose favorites. As it turns out, things aren’t always as they may seem.

I said there are three important questions, but so far have mentioned only one. Check back for part 2 in my next column.
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Contact a professional at Laser Financial Group who has the real-world experience to help you answer the most important question you can ask about your retirement plan. Set up your complimentary, no-obligation consultation and learn about your options for creating a retirement plan that's tailored to your needs and goals. Call us TODAY at 877.656.9111 or visit us on the Web at LaserFG.com.

The Most IMPORTANT Question to Ask about Your Retirement Plan

The Most IMPORTANT Question to Ask about Your Retirement Plan

I believe I can safely say that, at the end of the day, the number one reason we save money for retirement is so we can enjoy decent lifestyles, each of course depending on how we may define decent. Somewhere within that definition of “decent” is the expectation that by following a particular investment strategy, the seed money we are socking away will grow or multiply.

That seems to be what all the folks I have spoken with expect – and that’s a totally reasonable expectation. I mean why would I go with a retirement savings plan that’s not going to help me grow my assets? You wouldn’t put money in a plan I recommended if you didn’t strongly believe and expect that it would increase your assets, would you? So here’s the thing. I submit that after all the bells and whistles, ins and outs, explanations and reasons you might receive about a particular plan, the most important review question must be this: Is your plan making money for you - or the other way around?

While some financial experts may make it seem like we all lose money (and make money) together, that’s totally bogus. There are investors just like you who don’t lose any money when the stock market dips. In fact, there are those whose assets grow every year, regardless of what happens on Wall Street. I guess what I’m saying is that there are alternatives, so don’t hold back from asking the right tough questions.

At some point, we have to put aside all the charts and projections and get down to the basics, don’t we?

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Contact a professional at Laser Financial Group who has the real-world experience to help you answer the most important question you can ask about your retirement plan. Set up your complimentary, no-obligation consultation and learn about your options for creating a retirement plan that's tailored to your needs and goals. Call us TODAY at 877.656.9111 or visit us on the Web at LaserFG.com.

Celebrity Advice: Is It Really Worth ALL the Hype?

Celebrity Advice: Is It Really Worth ALL the Hype?

In this day and age, financial advice is pretty easy to come by. One could therefore make the assumption – at least logically – that retirement investors should see an uptick in their success ratios, as far as hitting their financial targets. Yeah, I know. That’s not even close, in reality.

Of course, many reasons may account for this sad phenomenon, but in my humble opinion, one of the main culprits is that many Americans confuse what I call “celebrity stuff” for  solid advice that actually works. What do I mean by that?

So-and-So has their own radio/TV show or has written several finance books/articles. So by implication, he/she must therefore be top notch, in terms of giving advice that will actually deliver the tangible results you desire, right? Of course, that’s not necessarily the case. But let’s face it, how do most of us compare – and rate – two different sources of financial advice (or just about any kind of advice, for that matter)? Well, they’re on TV/radio or writes for such-and-such magazine, so whatever they say must supersede the advisor who doesn’t have such a gig.

By the way, don’t get me wrong. I’m not saying that these “celebrity advisors” always offer bogus advice, per se – or that those who’re not celebrities are always better. I’m simply suggesting that you might want to stick with professionals who have real-life clients (not fantastical hypothetical clients, but folks just like you) who followed their advice and are actually enjoying the kind of lifestyle you envision. Doesn’t that just make sense?

The thing we all need to grasp is that anyone (and I mean ANYONE) can present theory very well. But as far as I know, theory hasn’t delivered a single retirement check just yet. In other words, you’d be better off focusing on the guy/gal whose feet are at the pedals, actually delivering tangible results, instead of someone who just looks on from afar and tells you what they think might work – or what they get paid to tell you they think might work.

Just so you’re aware, I’ve authored a few personal financial books and reports. I also write regularly for quite a few magazines, newspapers, and online platforms as well as regularly appearing on radio shows and TV, too. Actually, I’ve recently been exploring the possibility of hosting my own financial radio show in the DC area – so I couldn’t be possibly against those who do such things.

At the end of the day, however, do you want to manage your hard-earned money based on the views of someone who’s just really good at talking the talk or someone who’s actually walking the walk? I think you get my point. Does your advisor have tangible results you can really count on?

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Contact a professional at Laser Financial Group who has the real-world experience to get you where you want to be. Set up your complimentary, no-obligation consultation and learn about your options for creating a retirement plan that's tailored to your needs and goals. Call us TODAY at 877.656.9111 or visit us on the Web at LaserFG.com.