Eric and I just came back from an investment seminar given by Doug Andrew. Check out his website. It was a completely new way of thinking about investing for your future. I am still digesting everything that we learned tonight. Eric read this book, the second in the series, ahead of time.
The concepts are definitely not main stream, but propose a new way of looking at things:
1) It benefits you to have a mortgage. As long as you have a mortgage, you have the interest deduction and a greater tax benefit. It goes against the main stream thought of making extra principal payments to pay off your mortgage faster.
2) Leverage the equity that you have in your home. You cannot earn anything off of equity because it is not liquid - you do not benefit unless you sell your house. Therefore, borrow against your equity in the form of a home equity line of credit. A house is an asset. The cash you get from a line of credit is an asset. Therefore if you have a liquid asset in the form of the home equity loan, you can pay off the mortgage if you really need to. But you also have the option to re-invest the money you get from the home equity loan.
3) IRAs and 401Ks aren't the best retirement approach.
4) The most conservative and safest investment is long-term insurance contracts, that pays out life benefits as well as a death benefit. These are tax free.
So let's say you borrow $100,000 on a home equity loan at a rate of 6%, and re-invest it in long-term insurance contracts that pay interest at 5%. Most people would say that it doesn't make sense. However, since the long term insurance contracts are invested at a compounded 5% rate, and they are tax free, you end up making more than the 6% borrowing fee.
Okay, I know all of that probably sounds really confusing. And I KNOW that I didn't give the 2 hour seminar justice. I haven't signed up for anything yet, but it has definitely intrigued me to read more about the concept. I'll report back my thoughts and clarify the concepts.....
1) It benefits you to have a mortgage. As long as you have a mortgage, you have the interest deduction and a greater tax benefit. It goes against the main stream thought of making extra principal payments to pay off your mortgage faster.
2) Leverage the equity that you have in your home. You cannot earn anything off of equity because it is not liquid - you do not benefit unless you sell your house. Therefore, borrow against your equity in the form of a home equity line of credit. A house is an asset. The cash you get from a line of credit is an asset. Therefore if you have a liquid asset in the form of the home equity loan, you can pay off the mortgage if you really need to. But you also have the option to re-invest the money you get from the home equity loan.
3) IRAs and 401Ks aren't the best retirement approach.
4) The most conservative and safest investment is long-term insurance contracts, that pays out life benefits as well as a death benefit. These are tax free.
So let's say you borrow $100,000 on a home equity loan at a rate of 6%, and re-invest it in long-term insurance contracts that pay interest at 5%. Most people would say that it doesn't make sense. However, since the long term insurance contracts are invested at a compounded 5% rate, and they are tax free, you end up making more than the 6% borrowing fee.
Okay, I know all of that probably sounds really confusing. And I KNOW that I didn't give the 2 hour seminar justice. I haven't signed up for anything yet, but it has definitely intrigued me to read more about the concept. I'll report back my thoughts and clarify the concepts.....
...by the way - I felt so "adult" being at an investment seminar!!!
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