Well, Hi everyone, and welcome to another wise money tools video. So in our last video, we were talking about this radio guy who was talking about the six main points about money and investing. And we got through a couple of them. The first one we talked about was getting out of debt, that seemed very obvious, I think every financial advisor would agree that getting out of debt is a good idea. The next one we talked about was deferring all the taxes, you can maximize your 401k if you have one. And at least do an IRA and maybe a Roth. So what we're gonna do is now pick up on the third one, which was, if you have more than 10 years to invest, then by mutual funds. Then we're going to quickly hit the fourth one, but don't buy individual stocks.

The fifth one by term insurance, because that's all you'll ever need. And then the sixth one was more of an absence of talking about a very important asset and that is real estate. And of course, since he's a securities broker. He's not gonna say much about real estate being an option. Because they don't typically get involved in that. So again, we talked about getting out of debt, and the strain that puts on marriages and families, it really is one of the best financial moves you can do, you can first do and that is eliminate your debt. Our banking system, by the way, is typically what does that perfectly. And so you might want to check that out, because it can really get you out of debt a lot quicker and give you capital at the end.

And then like I said, we talked about deferring taxes, and whether or not that was really a help or not, there's certainly some trade offs there. One being not knowing for certain that you're gonna be in a lower tax bracket when you retire. And that's a big one. Alright, so here we go on to number three. If you've got more than 10 years to invest, they recommend that you buy mutual funds. Alright, so this was kind of kills me. All right, it's almost to say, if you have 10 years or more, you're gonna be fine, you're gonna make money. Well, let's look at a few things at face value first. Here's a look at our real return after inflation and taxes. And what I'm gonna do is I'm gonna use an 8% rate of return. Which is basically been the average of the S&P 500 for the last 10 years, it's actually 8.18%. And these have some you know, we've obviously been in some really good years, I think you'd agree.

Remember some of my other videos where we point out that average does not equal actual returns would be really critical to watch now. Just so you can get a flavor that just because something averages 8% doesn't mean it's actually going to achieve that 8% return, there's a big difference. Sometimes it's big enough to drive a semi truck through, so don't believe averages. Anyway, again that's another video. Alright, so what I want you to do is look at this calculator that I've built here. And here's what we have, we've got $10,000 invested every year for the next 10 years. And we're gonna put in that it's done 8% every year. We're gonna throw in 2%. for inflation. We're gonna put it at a 25% tax bracket. And you can see that our future value would be $166,000. Now after tax, that drops down to $124,000.

And finally, after taxes and inflation, we dropped down to $109,000. So let's not kid ourselves into thinking that buying mutual funds for the next 10 years is gonna get you all that far. Now this particular financial advisor was so insistent that if you have 10 years, it's the only way to go. So now here we come to my real message, what I really want to get across to you right now. You could go 10 years, 15 years, 20 or even 30 years. But if you were unlucky enough to retire within a few years of 2001 or 2008, your retirement probably went right out the window. You could have had stellar years up to 2001. And then BAM 50% of your money's gone. When you hit 2001. Now think about that. Let's say you had a million bucks in your 401k, then almost overnight, it's worth half that. And this is the money you planned on retiring with, then this turned around and happened again. Honestly, in 2008 mutual fund values were down 50%, they just obliterated your retirement.

So it's really borderline absurd for these guys to say, if you have 10 years you can invest? Well, that's great unless your 9th or 10th, or even your 8th year is a 2001 or 2008. And then what did they do? Sorry, that didn't quite work out for you. But for most people, if they go 10 years, they turn out fine. Well, here we are 2019, we've had a good run these last 8, 9, 10 years, maybe almost too good. So at some point, we're gonna have a recession, a fallback, a correction, or whatever you want to call it, it's gonna happen. They always have they always will, and one is on the horizon, I just don't know how far out that's gonna be. So if you're comfortable relying on the fact that your mutual funds at these all time highs are gonna do even better over the next 10 years. Well, I might want to remind you that in 1929, it took nearly 30 years for $1,000 to be worth $1,000 again.

I think about that in 1929. If you had $1,000 obviously it dropped off the face of the planet. But then it took 30 years to be worth $1,000 again. Now I'm not trying to be gloom and doom here. I don't think there's a depression coming. I like investments. I even like the market. But I like the market when it's on sale and not at these highs. I don't like mutual funds. And I certainly don't like these guys talking about averages and throwing those things out. And I certainly don't want you to think that just because you've got 10 years that nothing could go wrong. How do these guys know that in 2029, it's not gonna be another 2001 or 2008 or heaven forbid in 1929. You know, back in the 70s, there was a basically a day a decade long of basically nothing. And if we go back a little further, in October of 1965, the Dow Jones Industrial Average was 960.

It took until December of 1980 for the Dow Jones Industrial Average to be 963. So 17 years of basically stagnant do nothing type growth, get these financial guys, and especially these radio guys want you to invest in a market at an all time high. As long as you have 10 years. Well, I'm glad they have a crystal ball. I love it if you were more empowered, more educated, a better investor and didn't rely on advisors who really have no sense of reality, and don't look at these things. And quite frankly, don't manage money, they simply send it off to a mutual fund and then charge you fees. You Meanwhile, have to cross your fingers. Hope we don't have another way during your retirement years, or your retirement could be toast. Bottom line, I don't care if you have 10 years or 50 years, knowing what to invest in understanding the investment, understanding why you're investing, understanding the financials of the investment.

You don't have to be a CPA, but you do need to understand a few numbers. And at what price should you be paying for that investment. This is the only way you're gonna have any semblance of control over your financial future. Now, lately it's not uncommon to hear from those who are trying to be patient, wondering if they should be invested in this market. They keep on asking, should I buy in man, I hate to miss out. What if the market keeps going for another couple years? Honestly, that could happen. I mean, we've got a pretty good economy right now. However, it doesn't negate the reality that from an earnings perspective, and from a price perspective. It's much higher than the cash flow, or the profits or the revenue, whatever you want to call it warrants. I can tell you that many of those who've experienced gains over the past number of years. They're probably eventually going to lose most of it, depending on how significant the next recession or pullbacks gonna be.

In other words, if we have a 30% market drop, that could wipe out three to five years of return money they thought that was gonna be there's. If we see another way, that could mean 8 to 10 years of growth wiped out virtually overnight. It may be better to be a buyer when the price is below the value. Then you can pretty much stay invested for decades, if you get in at the right time. As you you can see, financial advisors for the most part, have no interest in this. They need to sell you these mutual funds and start collecting their fees right now. Obviously, they want you to come out, okay, and they hope you come out. Okay. But they're not really thinking through the whole process. They rarely ever asked this question. Is it a good time to buy, they just basically say if you have 10 years, it's a good time to buy. They use catchy phrases like, Don't time to market or it's not about time. It's timing.

They make you all feel, you know, warm and fuzzy and all cozy. But they're meaningless terms are meaningless phrases. They're not slogans that the wealthy and great Investors live by any means. From the advisors perspective, it's well if you have 10 years or more than you should invest. And to me, that's just borderline insane. Okay, so that was a little bit of a soapbox. I'll get off that from for now. Anyway, I wish I could grab some of these advisors by the shoulders and shake some sense into them. So be careful of the same old tired advice traditional advisors have been giving for years. I always say if traditional financial planning worked. Then more people would be retiring with more money, but they aren't. In fact, so many retirees are struggling to make sure that they have at least enough money to last their life. They don't want to run out of money before they run out of life.

Okay, so I went a little long here. So I'm gonna push our next item the number four don't buy individual stocks to the next video. In the meantime, if you have any questions, make sure you shoot those questions. To questions at wise money tools.com. I'll answer them just as quick as I can. Don't forget to subscribe. If you ever want to have a quick strategy session, click on the time trade link below and we can get together and have a little conversation about your particular situation. So that's it for this video. I will talk to you next week. Take care.