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Is there a Work-Around for the Risk of Investing

When you think ofinvestments, what comes to mind? Probably the stock market, right? You hear ofpeople who bought in on the IPO (Initial Public Offering) of what became aninsanely profitable company and were set for life. But then you also hear ofpeople who lost everything they’d saved for their whole lives, ending upcompletely broke.

The market is cyclical andunpredictable by nature - otherwise, everyone would see what’s coming. In fact,many times it’s been the experienced, initially successful investor who endedup losing everything. To prevent that from happening, investors have learned todiversify their investments, which is another way of saying don’t put all youreggs in one basket.

Since most investors don’tknow where to begin to strategize a diversification plan, they often rely onmutual funds. Mutual funds pool money from many investors and invests thatmoney into stocks, bonds and other short-term debt. Investors buy shares inthis fund, which is professionally managed by an investment advisor. That doeshelp provide diversification, but it isn’t a guarantee of profitability.

As a case in point, in 2008,the S&P 500 index finished at -38.49%. That was after three consecutiveyears of double-digit percentage losses in 2000-2002 (including -23.37% in2002). So even with that level of diversification and professional management,there is great risk. The Pew Research Center, as quoted in the Kansas City Starof November 22, 2018, stated that, “the net worth of the median Baby Boomerhousehold in 2016 was still nearly 18 percent shy of where it sat in 2007”.Nearly 10 years and still not enough to be near recovery.

So, what can you do toinvest as safely as possible and protect you and your family’s financial future?If you could design your own investment product, what would it do for you?Every time I ask someone that question, I get the same answer. "When theeconomy is up, I want my investment to go up, and when the economy is down, Idon't want to lose anything - no risk. And I want it to grow compound interest,tax-free and be something that I can pass on to someone else when I die."

Believe it or not, that DOESexist. EXACTLY that! And that will be the topic of my next post.

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