It's Rising Time! by Kim Kiyosaki

Author:Kim Kiyosaki
Language: eng
Format: epub
ISBN: 9781612680873
Publisher: Plata Publishing, LLC.
Published: 2016-01-24T16:00:00+00:00

Savings

With the dollar and other global currencies decreasing in value, your currency is worth less and will buy you less in the future. On top of that, the interest you are paid by the bank for your savings may earn you less than the fees and expenses you have to pay to keep your money in the bank. By saving money, in many cases, you are losing money. Would you call that a safe investment or a risky investment? An investment that consistently loses money is a liability.

Mutual Funds and 401(k) Plans

Mutual funds and 401(k) plans are basically the same thing. A mutual fund is simply a collection of stocks, bonds, and other similar securities. It could also be a company that pools the money collected from many investors and then invests those funds in stocks, bonds, and other similar paper assets.

A 401(k) is a retirement plan, often considered a retirement savings plan, set up by employers that allows employees to contribute a portion of their salary into this plan. A 401(k) plan invests the employee’s contribution into mutual funds. Similar plans exist in other countries under other names such as a superannuation in Australia and New Zealand, an RRSP in Canada, a 401(k) in Japan, and a pension scheme in the United Kingdom.

So what’s risky about mutual funds and 401(k) plans?

Many financial “experts” tell us mutual funds and 401(k)s are the answers to our prayers because: “If you are 20 years old today and you invest $1,000 into mutual funds or your 401(k) and you earn 8% per year, when you retire in 45 years at age 65, that $1,000 will grow to $140,000.” Or at least that’s the sales pitch.

Here is the reality on mutual funds. These facts do not come from me. They come from John Bogle. Who is he? Mr. Bogle is the founder of Vanguard, one of the world’s largest mutual fund organizations, and the author of a book entitled The Battle for the Soul of Capitalism. He is now speaking out against the mutual fund companies because, as he says, they have gone from stewardship of your money to salesmanship. They are there to make money for themselves, not for you, the investor.

These are the facts from Mr. Bogle as he talks about the mutual funds’ “tyranny of compounding costs”:

Well, it’s awesome. Let me give you a little longer-term example I use in my book of an individual who is 20 years old today starting to accumulate for retirement. That person has about 45 years to go before retirement—20 to 65—and then, if you believe the actuarial tables, another 20 years to go before death mercifully brings his or her life to a close. So that’s 65 years of investing. If you invest $1,000 at the beginning of that time and earn 8 percent, that $1,000 will grow in that 65-year period to around $140,000.

Now, the financial system—the mutual fund system, in this case—will take about 2.5 percentage points [in fees] out of that return, so you will have a gross return of 8 percent, a net return of 5.

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