Do You Have ANY Safe Money?
Find out why you probably don’t have safe money—and
neither do your friends—and why you should.
Find out why most investment advice is outdated, and
most advisors are giving advice based on data from the
last millennium. This is not the best plan!
Did you know regulators can stop someone with licenses
and training from writing books on investing, but those
same regulators cannot stop people without training or
knowledge? Unlike most books on investing, this one is
written by someone with training and licenses, who is
risking losing one or more of those licenses to bring you
By Doug Rough, MBA, “The Safe Money Analyst”
The book is available on Amazon.
Provided free, below is the introduction
Do you have a financial plan that includes safe money? If not, then you should, and I will help you make one. If you already have a financial plan with safe money, it is likely outdated! Why?
There are only a few ways you got your financial plan if you have one: From reading a book, listening to somebody on cable/TV/internet, or from a financial planner. I will boldly say that they are pretty much all using data from the last millennium, data that is too old to be useful. This book will explain why I think so.
Did you know that it is nearly impossible for someone with financial and insurance licenses like I have to publish a book on investing? I know, as it took me about a year to get this book published. I risk some of my licenses to publish this book. Regulators using laws intended to protect the public from false advertising are able to stop someone with education, training and licenses (like myself) from writing a book on investing, but they cannot stop some idiot who doesn’t know a darn thing. Yes, that is your government at work. The result of this kind of crazy regulation is that any authors you read or people you see on the cable/TV/internet almost certainly do not have financial and insurance licenses, or what I call proper training! They are selling the following concept: “I got rich and you can too, by doing what I did!” Why is that bad? Because these folks nearly all got rich in the 1980s and 1990s, and the world has changed! Also, most infer that money = happiness. Not necessarily. And, to a large extent these folks were lucky, and basing your plan on luck is not what I would recommend.
The main problem is safe money. Nearly everyone agrees it is a good thing. I claim the places that used to have it no longer have it, and most financial planners did not get this memo. Many financial advisors are putting what they call “safe money” in the stock market. I say you cannot get safe money there. As I will explain, we need to look beyond where people found safe money in the 1980s and 1990s, and don’t use the stock market for safe money.
Do you have safe money? Not likely.
“Safe” money means, simply:
1. Guaranteed, and
2. Likely to beat inflation.
Preferably guaranteed by a solid entity, not rescued years later after a bankruptcy by the US Government. I doubt you have any safe money by my definition. Where is safe money these days? As of 2017, not in banks, CDs, nor in most investment houses. It may be that some insurance companies are the best place, perhaps even the only place for many folks to get it. I say safe money is necessary—I call myself The Safe Money Analyst—but I argue many if not most advisors these days are recommending strategies that contain no safe money by my definition.
Without safe money, either a market crash ruins you quickly or inflation ruins you slowly, you are most likely down the path to ruin. The market falls, you lose your job and you are left with less purchasing power than you originally had. How does that feel? You get to retirement age and cannot pay the bills you used to be able to pay. Is your future dependent on underfunded Social Security?
Don’t feel too bad—this is a pretty new problem. Historically, if you didn’t die before age 60 like nearly everyone else, some spare food could be found on the farm where you lived. It is a different world today. Nowadays you have to rely on your own savings and you have a lot more bills to pay.
And what if the stock market soars? Do you want to be stuck when everyone else has tripled their money? How do you protect against the bad yet capture the good? And what about nearly certain higher taxes due to the federal budget deficit? What should you do?
What do I mean by “The ’Normal’ investing advice is outdated”? In some ways, the investment world has never been normal. It does not follow the Normal Distribution—that nice bell curve where everything is symmetric on either side. The odds of something happening in one direction in the investment world are almost never the same as the odds the other way. And the normal distribution assumes randomness—although things may seem random, governments, politicians, corporations and individuals are influencing the market in decidedly non-random ways.
Everyone needs a plan. As I said, if you already have a plan, I claim it is likely a bad one. You can make a good one. I’ll help.
In other ways, the investment world and in particular safe money is very different than it was in the last millennium. Changes in laws and regulations, huge budget deficits and in particular extremely low interest rates have changed what is normal. I re-examine the “normal” advice with regard to these changes using data from this millennium. I argue most books and advice are based on data from the previous millennium. Advice based on data from last millennium should be ignored!
I talk about areas where my advice differs from others and why I think the math—and logic—is on my side. The normal advice has always been to have a significant amount of safe money and some money at risk. What has changed is that many advisors have changed their definition of “safe money” and added risk. I disagree with this change.
Recessions are a near certainty. I explain why you need a proper amount of safe money by my definition. Businesses need safe money, too. I’ll even talk about why you might want to consider either investing in real estate or starting your own business or both, but not without safe money.
Are you in the service industry? If so, you cannot afford to have other people be unable to pay you in the case of a recession or bad news in general because they don’t have safe money. Tell the people you work with about this book so you can be sure to get paid!
Another way this book is different than others is that I come from a background of optimizing. Other books on investing implicitly assume that maximum money is optimum. I argue that your objective should be to maximize your level of financial comfort and happiness, rather than to maximize your money.
In order to talk about all this, I make some assumptions. The first two chapters are mainly intended as reference, so you may want to start with Chapter three and come back to the first two chapters later. Chapter one is what I call “common knowledge”—pretty much a list of my assumptions.
In Chapter two, I talk about my background. Why do I spend an entire chapter on my background when most authors just have a small paragraph? Because I am calling most investing advice wrong, so you need to know about my 37+ years of financial computer modeling and strategic planning experience, my degrees and how I was offered a job as a professor of finance after I got my MBA, plus the licenses and skills I have in order to decide for yourself if I have a point or if I am all wet. I am not trying to brag, but to convince you that I have training, education, licenses, and experience that no one else you have been listening to has. Again, skip this chapter if you want.
Please read Chapter three. In Chapter three I claim the three things to remember in investing are: Asymmetry, Asymmetry, Asymmetry. By that I mean asymmetry in value to the investor (e.g. a loss hurts more than a gain helps), asymmetry in the market (e.g. markets fall faster than they rise), and asymmetry in reporting (e.g. people talk much more about their good investments than their stinkers). This latter asymmetry in reporting also explains why you only hear about the successes of the books/cable/TV/internet folks. If you never hear about the failures, you might think that all TV and internet advice is successful. Wrong!
Next, the old normal of dying just a few years into retirement has been replaced by the new normal of living long into retirement, which translates into a greater than ever need to plan and save. I talk about longevity and what it means for investing in Chapter four.
In Chapter five I examine and disagree with an actual advisor’s advice. I think the math is on my side.
Before you can understand the logic behind my investing framework, there are ten more issues to discuss in Chapter six. Among other things, this chapter is about how low interest rates have changed the normal strategy for investing in the past decade or so. Thus, what was considered normal investing thirty years ago no longer works well. I re-examine that old normal strategy due to low interest rates. Here again I disagree with many other advisors on what to do, and I explain the math behind why I think I am correct here.
I suggest we plan for both the Bull Case and the Bear Case, so that if either happens you will be reasonably happy. In Chapter seven I detail what world situations might conspire to move the stock market to a Bear or a Bull Case. I use all this to set up a saving framework, with some safe investments, and some risky, with tax benefits structured to try and pay the least amount of taxes, not just now, but over your lifetime.
Chapter eight sets up a framework for investing that makes sense given what the world looks like in 2017 and going forward.
The worksheet in Chapter nine is an exercise to see how your own portfolio fits the framework if you are saving for retirement. If you are already retired, use Chapter thirteen as your framework exercise worksheet.
I consistently make the case that no one can know the future, but the past is clear. If you are reading this in 2047, then you know obviously what should have been done. We here in 2017 do not know yet what will happen in the next thirty years, so we plan based on what we know as of today.
By the time you get past chapter nine, you should be on solid financial ground. You may even want to start your own business! In chapters ten and eleven, I talk about special issues for small business owners with regard to safe money and why if you set your small business up properly with safe money, you should not only be prepared for a recession, but look forward to it!
In chapters twelve and thirteen, I set up a framework for those who are already retired. Here again I disagree with many advisors and I explain why.
Everyone is different, and you cannot give one-size-fits-all advice. This book is intended as a guide. In Chapter fourteen I explain a few examples. Someone suggested I should have put the examples sprinkled throughout the book, but since I am disagreeing with other advisors, examples before explaining why didn’t seem wise.
In the last chapter, I sum up and again point out that your goal should be financial comfort and happiness, which is not the same as maximum money.
Tell your friends about this book. They may thank you.