You wouldn’t confuse gum with the wrapper that it comes in, but many people do pretty much the exact same thing when it comes to their investments. Wayne and Lisa talk about the metaphor of gums and wrappers for investing, and why you need to understand how they work together to create something that serves your financial goals.

• Don’t confuse the gum with the wrapper. Investing is a lot like the gum in its wrapper.
• People often ask Wayne if they should invest in an IRA or a Roth IRA and he always tells them no because those aren’t investments. Investments are the things with three R’s: Risk, Reward, and Ready Access.
• To continue the metaphor, you have to pick the right flavor of gum for your personal situation. It will take a different flavor of gum to put your kid through college in two years than it will to make sure you can retire in twenty years.
• The wrapper is the account the investment gum is packaged in. The wrapper conveys a particular type of tax treatment and how the investments are taxed while they are in the account. There are also ownership concerns as well, you can’t for example have two owners on an individual retirement account.
• The wrapper also sets how much you can put into the investment. It also determines what happens to the account when you die. Much like the opera, everyone dies in the end so you need to plan for that.
• A good example is Apple stock. Apple stock is a security that has the attributes of the three R’s: Risk, Reward, and Ready Access. You can take that investment and put it into a variety of different wrappers, or investment accounts. Just like the investment, the wrapper you choose should match your needs and what you’re trying to achieve.
• Make a list of the accounts/wrappers you currently have, the wrapper type will probably be in the title itself. You can find that info on your paper statement or your online statement.
• For the future, the best step is to take what makes each wrapper unique and then start exploring. When you’re putting together your financial plan with your financial advisor, figure out what types of wrappers you should add. Some investments are best suited for certain types of wrappers so that’s a conversation you should be having with your advisor as well.

  

To explore working with Wayne Firebaugh to fireproof your money, please call 855-WAYNE KNOWS or check out at fireproofyourmoney.com.