Thursday, September 20, 2007

Everybody wants to be an instant millionaire these days! Here's a fairly easy way to achieve it in far less time than you would imagine!

Everybody wants to be an instant millionaire these days! Here's a fairly easy way to achieve it in far less time than you would imagine!

Guess what, you don’t have to be a football player, a "pop idol" or win the lottery to become a millionaire, you can just do it the old fashion way (saving).

The answer to this myth of how to get rich quick is that you can't, everything in life requires hard work, dedication and nothing comes easily. I am fortunate enough to know many millionaires and several billionaires and every one of their overnight successes was preceded by at least 5 years of hard work and graft (and in many cases 10-20)! However you can increase your net worth and therefore directly affect your ability to create greater returns form existing investments as well as to accrue wealth faster.

How do you do this, it is very simple, if you want to become a millionaire, write a $1 million whole life insurance policy. This will require some effort on your part, nothing in life worth having is easy. If you get a borrowing/ cash value rider then you can borrow, often upto 90% of the policy cash value. The principal appreciates tax free. Once you have used up your tax free allowance into IRA and pension funds this is the next place you should look to put some money so it can at least grow tax free.

What doors will such a policy open for you and why will it increase the probability of you becoming rich!

If you go to any major banking/ investment institution they will have a varied range of financial products. Many of these offerings though are limited to high net worth individuals and accredited investors. Derivatives, Notes, Structured Products, Hedge Funds and other vehicles for generating double digit annual returns (sometimes with capital protection) are considered speculative or are only available to experienced investors with "suitable experience" to make such investment. A $1,000,000 whole life policy will provide you with access to many of these deals.

Why is the gulf between rich and poor widening?

For exactly the reasons mentioned above, the wealthier you are, not only do you have greater investable assets but you have access to better asset classes. Banks such as Merrill Lynch, UBS, Deutsche Bank regular issue complex derivative products that have double digit returns with capital protection through the utilization of options, hedging etc. A money market CD offer 5% per annum whilst a "sophisticated investor will have access to a principal protect barrier note with 210-230% the upside and 100% principal protection based upon the Deutsche Bank Currency Returns Index (Bloomberg Ticker: DBCRUSI Index). Sound complex, well it is, the brightest minds in the world are constantly trying to figure out new ways to make rich people richer and with a million dollar net worth you will have access to such products. As a result a $10,000 account can earn as much as a $43,000 Cd over a 5 years. Now do the maths and use the whole $43,000 and you will see what i am getting at! (its over 100k) The other huge factor this accumulation of wealth is compounding, were interest in accreted!

Why are the baby boomers so wealth and why will the next generation be poorer?
What happened to home equity and property value as Americas saving method for retirement?

This is a fascinating question and the answers are inextricably linked. During the 50-70's people were encouraged to adopt the American dream and buy their own home. At the time people were paying capital and interest so with every payment they reduced the principal owed on the house and built their equity value. The property appreciated as it almost does over any 25 year period and the home owner was left with what had essentially been a tax deductible savings account containing a considerable and valuable asset.

Copyright Jonathan Rose 2007 - Creative Commons License

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