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Trading the Talents, Part 2-Evaluating Investment Options

Alistair Huong
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Description

Objectives:

1. Evaluate common types of investment accounts and their benefits.

2. Analyze common investment vehicles and their benefits.
3. Assess investment types to avoid. 

Presenter

Alistair Huong

Executive Director of AudioVerse

Conference

Recorded

  • October 27, 2017
    3:15 PM
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Free sharing permitted under the Creative Commons BY-NC-ND 3.0 (US) license.

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Father in heaven thank you for bring us a few together again I pray that you will guide us in our discussion help us to think with principles of how to manage our money in a way that will glorify you give us wisdom with the Holy Spirit we pray in Jesus' name amen. So the last hour we went through principles and with the principles we have created a score card. That we can use to help us evaluate. Various types of investments so this is the scorecard we have nine points total. And the green checkmark I hope it actually shows up for the screen well enough for you to see that means it's good our red X. means not good I think that makes sense and the point total is just added up of the green checkmarks. So what I've done with the scorecard it's not an objective. Measurement that is that everybody in all circumstances at all times this is a tool for you to apply for your particular situation so that's need to be stated up front so when I say is it easy to understand an investment might be easy to understand for someone who has a lot more experience or a lot more education in a particular field then I do so just because I don't find it easy to understand does not necessarily mean it's not easy to understand everybody and might be for you cannot beat inflation of course things change you know investments can change with time at there were there was a time when home mortgage rates were very high and CD rates were much higher than they are today in savings accounts and so forth. Is a low cost of course that's also a question that it's a compared to what diversified and we say diversified some investment assets are diversified has diversification. Built into them. They're easy to diversify on your own versus some investment they're just such a large capital investment it's hard to diversify so there are different ways to answer that question and also speculation we talk about speculation being something that generally arises from within the investor as opposed to being in the in the asset but there are certain assets that by the way that they are handled are. Tend to be more speculative than others so that's a question ask how much time to manage I think that's self-explanatory acceptable risk Different people have different risk tolerance is some people can take on more some people can take on lesser liquidity again it's not a matter of right or wrong whether it's something liquid or not is just we need to take it within consideration in the whole investment portfolio and this last one I need to clarify a little bit and that is when I said complete moral clarity. It's not whether something is morally acceptable or not that's not what it's saying it's saying can we have clarity in all of its incidental and indirect moral affiliations is what I'm trying to communicate here is it possible when we're looking at a particular investment is it possible to know with one hundred percent certainty that all of its incidental. Ramifications and interactions beyond my initial direct interaction is also morally in the clear it's more a matter of can I know verse is a right or wrong so I just want to make sure that that point is clear because if something is morally unacceptable it's morally unacceptable but this is more a matter of can I know with perfect clarity All right so let's take a look here at I already summarize this but the scorecard as a guideline to help evaluate investment types so some of these ratings may be subjective OK and higher scoring investment should be given prior. Already in our portfolios but that doesn't necessarily mean all lower it's going investments should just be discarded they can be useful for diversification purposes it's a matter of weight you know what are you going to place more weight in using the knowledge of the eggs in the basket the bigger the basket and the stronger the basket the more eggs that can hold versus the one that's a little flimsy or so similar concept. So let's take a look here at some types of short term savings. So I notice I call them short term savings they're not investments because they don't beat inflation. But savings accounts money market C.D.'s we're familiar with what those are you can get them at our local banks and other places bonds there are corporate bonds there are municipal bonds there are U.S. federal treasuries they call them there is also a type of bond called tips and it stands for treasury inflation protected security and what it is it's a type of bond issued by the U.S. federal government that is pegged to inflation so not only do you get what's stated on the on the bond as an interest rate but also adjust for inflation so in inflation goes up you actually get. Covered for the increase in inflation so it's inflation protected and then there are what's called bond funds will talk about mutual funds more in a moment but bond funds are the type of mutual fund that specialize in purchasing many bonds and there are benefits and pros and cons to doing it that way but though that's what those are and S T A union revolving funds how many of you here are familiar with revolving fund and heard of what they are OK So for those who are not familiar at least here in the U.S. I don't know if they have them in other countries in the world. And not even all unions in the North American division has any more but our unions have a fund in which we can invest money that goes back to the Lord's work and this is. How it works you get a note so you're loaning money to the church and the church has this fund through which they can loan money out to other church entities for their use so usually it's like church building projects or buying a church or something like that and so the church is then paid the union and interest rate it might be four or five percent and then the members who actually supply the money to the fund they also get an interest rate in the Southern Union where I'm at right now I think the industry is about one point two five percent so we're not talking about huge amounts here but for someplace that's burning us a little bit of interest and at the same time it's investing in the Lord's work I actually think that you union revolving funds are a great option include within our investment portfolio it's something worthy of being considered and I mean the Southern Union's I'm not familiar with all of the other unions but what I recall one of my friends in the south western union said that their interest rates were quite a bit higher and then on the Pacific Union I think they don't have revolving funds anymore so you may have to do a little bit of calling to your union Treasurer's office to get more information on that. So when we talk about these types of short term savings we want to run them through our scorecard so are they easy to understand in general I think they're fairly easy to understand I think you would agree can they beat inflation and that's really the big issue here they generally don't and that's why we use them for short term savings so those of you who are here in the last hour. You remember we diversified short term savings things that we need within five years things longer than five years we invest in something that can beat inflation and so for the under five year range these types of savings vehicles can be useful now is a low cost in most of the cases that we just looked at Yeah they're very low cost if you've ever open a savings account it costs you nothing. And bond purchases and tips and so forth can be low cost but things like bond funds on the other hand can be don't have to be but they can be more expensive because there's someone managing it for you and there's a whole mechanism in between you and the investment itself so that's a matter of doing your homework it might be and might not be low cost is a diversified Well I put a green checkmark here a main Leigh because it's particularly useful for diversification purposes these types of short term savings investment options and are they speculative in general they're fairly safe in the sense that we're not speculating in them although people can and do speculate in bonds but most people don't how much time to manage no time at all really. This is exactly why we have these types of accounts is to mitigate our risk that's part of the diversification so yes I believe it's acceptable now the issue with liquidity is that for a lot of what we talked about is very liquid savings accounts are liquid but a CD Your understand you have to hold it to maturity a bond is the same thing but a bond fund on the other hand can be bought and sold within one business day generally and a revolving fund it can be usually you get your money back within a business week or so so some of them are liquid others unless you want to take a penalty on your bond or your CD rather you may have issues with liquidity and the complete moral clarity so can we know with one hundred percent certainty what all this money is being used for for our church the S.T.A. Union revolving fund I think. Most of us hopefully wouldn't have major ethical concerns with loaning money to the church but perhaps some people do. But as far as a putting money into the bond market like getting a U.S. Treasury bond you know that's a question that's really up to you because. The government surely are involved in things that I personally would not agree with but that's one of those areas where I believe we've been giving some boundaries as to we have to do the make the best decision that we can but that's a question for you to decide because we can't know for certainty where all those dollars or loaning to the companies are or the government is going Same thing with getting a CD we're loaning money to the bank are we comfortable with that that's a question to be considered. So let's talk about long term investments now that when we talk about long term investments particularly for those who have higher earning potential which is I believe the target audience here at Amen. There is a frequent question about financial advisors because I believe you know doctors have limited time on their hands physicians and if you have an area that you need specialty expertise you refer people that you refer to the specialist and so when it comes to the specialist to mow my lawn generally you know if you have if you're going to earn more money being at work than to mow the lawn you're going to pay the lawns keeping person to do that work for you so why not with financial advising or someone to manage my investments is a question I frequently get asked particularly from my doctor and dentist friends I feel like it's important to talk about a little bit. The simple point is that not all financial advisors are created equal and it's very important to understand that the term financial advisor really doesn't mean anything it's not a term like N D A doctor or dentist where you actually you have to have certain qualifications in order to assess you know carry that title financial advise anybody can call themselves a financial advisor and so how do you determine the good ones from the not so good ones OK So that's the point. The verb the biggest question is you want to. Understand are they salesman or are they for do series that's the fundamental issue here because a financial advisor when you hear the term you think they're here to advise me they're here to help me they like my coach on my team but the reality is most financial advisors are our salespeople and they sell anything from insurance to investment products to mutual funds to whatever else in between and they call themselves financial advisors but they're actually not they don't have interests that are aligned to you so what you want to find instead is what's called of the do Seery this year he is a person who is legally obligated to act and you're on your best for your best interest. And there are ways to determine that we'll talk about that in a little bit but C.F.P. is the most common it's not exactly a degree but it's a certification center certified financial planner so you do have to take a number of classes you do have to sit through a board in order to get this designation but not all financial advisors are required to have a C.F.P. and just because someone has a C.F.P. does not mean they're not a salesman OK so you've got to keep these things in mind because it's helpful to know what that is but it may not necessarily answer your questions so what we really have to do we need to follow the money how are they paid that's the big question because financial advisors have different ways of being paid the three most common one is a flat fee someone just pay them for their time or a percentage of assets so they take a look at your portfolio that they have under management for that year and they have a percentage of that that they keep for their services and then of course the commission which would be a dead giveaway that you're talking to a salesman OK. And I just have to mention this and that is doctors are prime targets because the financial industry knows that physicians have limited time. That high earning potential and they have this propensity to outsource to specialists and so they know how to hone in you've got a big target on your back of your physician and I've read a few financial blogs with they actually you know have quotes from other forums of these types of sales people talking about doctors and any way better to say those forums but the point is. Just this is a rule of thumb Just remember no one will ever care as much about your money than you unless they want part of it for themselves so there's a financial adviser who pretends OK that they have that they care more about your money than you do they probably do and they just want to make your money their money and you want a financial adviser who is going to be honest who's going to be a teacher who's going to be on your team if you do see who's going to charge reasonable rates so here is a spectrum of financial advisors and we're not going to read through all of it I got this from a financial blog that I follow and I thought it was it's not perfect but I think it summarizes the point. So over here in the green in the blue this is the range where you want to play if you're looking for a financial advisor This is where you want to focus if it's yellow orange or red you don't really want to go there and the similarity here on this on this side really is that. They are generally charging a flat fee. Or they are taking a percentage of assets and they do not get paid by commission because of their paid by commission they are incentivized to sell a product whether it's in your best interest or not. So the only passive management fee only active manager you know it is only here over here and then all of a sudden it becomes more commission based the other point point that you have to remember is you have to ask the person you need to check if they act as a for. Do Seery that need to be very clear and then the last point is you want someone who is looking at your financial picture holistically not someone who is primarily looking at one or two aspects so. I'm not saying that all insurance salesmen are bad make sure I'm making that clear but an insurance salesman who is only specialized in selling you insurance is that he's an insurance salesman or a broker not a financial advisor so a financial advisor is someone who wants to look at your whole picture what are your goals what are your values your income helping you with budgeting children savings not just to push you into doing what pads of their pockets basically So just like when we're talking about using another analogy here to a man well as physicians we want to look at a person holistically in the same manner when we're talking about our financial health we're wanding a financial advisor that will help us in a holistic way that's the easiest way that I could summarize and you want to make sure that their interests are aligned to yours and generally you look at the payment structure for that information so this these slides will be available on audio verse with the messages so you can check it out in more detail later but let's continue on and let's talk about some specifics now let's since we're here at a man and I know we have a number of. Business people here and physicians and with clinics and practices. Just want to start there I'm not here to talk about how to run a practice that's beyond my pay grade but within the context of our discussion here I just want to bring out a couple of points when we think about our practices and our businesses as an investment the first thing to remember is that if your career if you are if that's your primary source of income it's not particularly it's not only an investment it's all. Your career and so you have to view it differently but I do want to mention this and that is are you diversified because even if because I have talked with people or I've heard people say that their plan for their retirement or investments plan is to basically invest in their private business and that's it. And I don't necessarily think that's a horrible idea but I do want to interject this one thought imagine if you were let's say a dentist with a dental office in Northern California. And you open or you go to work one day and you hear on the news that you know half your town got burned down. And even if your practice was still standing and not permanently damaged and even that was well insured do you think that practice is going to be affected. You understand this is not a hypothetical situation and it's not something that's likely to happen to you know to all of us but the reality is things do happen and it has happened and so for our friends who may have practices right in that region that got severely affected by these fires. They are at risk their business is at risk because even if it wasn't damaged they have clients that are displaced now for a significant period of time and so even as a business owner I I think it is prudent to consider diversification outside of just the business not to say that you shouldn't invest in your business you should but also think of other ways of minimizing your risk and the other thing about risk I will say I can't help myself is debt is going to come back again when we talk about risk in other forms of investment is that whenever you inject large amounts of debt into a situation even if it was previously a low risk endeavor it becomes high risk because that's what debt does it's magnifier it's leverage right that's what they call it leverage it. Magnifies the motion either up or down so just something to keep in mind so I'm not a I'm not here to tell you how to run your business or let's move on OK So those are just a few thoughts I want to mention So we had a question earlier about individual stocks investing in the stock market and we're going to talk about a number of ways to invest in stocks primarily because it's the most common options available to most of us so individual stocks to begin with so let's take a look at our scorecard here. We have a. Red X. here for easy to understand so what do I mean stocks are fairly easy understand you're buying a portion of a business you collect your dividends you can sell it later what's so hard to understand it's not so much the concept of stock owning that's hard to understand is that in order to intelligently hold stock whether it's a privately held company or publicly held company for that matter is that as a business owner we need to actually understand the business. How does it make money how they're going to lose money how does it operate who are the what's the management philosophy what are the values you know the financial statements all of these things are part of understanding and if you are looking at investing in individual businesses whether as a private owner or on the public stock market exchanges to understand also comes along with this point down here about diversification because the amount of time it takes to diversify or to invest in one company imagine if you're diversifying across multiple businesses you multiply the time that it takes to do proper research and due diligence out to however many businesses you need to properly diversify your portfolio and so I actually think it takes far more time as well to properly understand in order to be well diversified so you see how these things go together and if you want to do it right you start seeing a lot of red X.'s. So it's a low cost well. The point I want to make here is with a green checkmark there are ways to invest in stocks affordably there's a little app it's called Robin Hood you can do trades for free but more often than not there are transaction costs and it can be high and of course there are taxes associated even if you don't think you owe anything buying and selling you can get a tax hit at the end of the year and this whole idea of speculation having a owning stock in a business does not necessarily mean you're speculating just like a doctor who owns a practice he's one he might be one hundred percent shareholder of the business that doesn't mean he's speculating. But a lot of people do speculate in stocks probably the most speculated asset class in the world and not only speculation you know as far as trading day trading but when people start injecting debt they're trading at what's called a margin they're borrowing money to trade the risk goes up and it's even more speculative and then there are options contracts and things of that nature that make stocks in general the way that the people talk about if you're watching T.V. see N.B.C. or whatever the way they talk about it they're not talking about investing in stock they're talking about speculating and stock and we don't want to associate with that and so that's generally what people mean when they talk about stock investing and so that's also why I don't believe it's an acceptable amount of risk for most people but it is very liquid for most docs you can sell it within one business day as long as the markets are open it's not even one business day can be instant practically. But on the moral clarity side because you are able to look at each business individually you're investing in individual businesses it is possible to have that clarity of knowing what are their values what are they doing how are they conducting their business to a point where we can know what they're doing so this is a this is an alluring prospect just like Dr Bivins one of our attendees in the last session share with me he recently invested. In a company and this was one of those things out made a difference for him he was able to know what they were doing. So scorecard wise the way I scored it we're talking for three to four points out of nine so in general I don't think investing in individual stocks is a particularly good idea for most lay people of course if you are professional in the financial industries world your scores may differ but for most people I believe I would not be comfortable recommending that. But we need talk about mutual funds because mutual funds are probably the most familiar for most people because it's available in a four one K.'s it's what's available for most of us most easily so active mutual funds are referring generally to mutual funds of equities or of stock so what's a mutual fund let me just define a very quickly for your mutual fund is an investment asset type where a lot of different investors pooled their money together to buy a collection of assets and that process is overseen by what's called a fund manager so there's a professional fund manager overseeing basically this pot of money and allocating those resources in such a way that is defined by its fund objective OK So these are a few important terms to keep in mind so a mutual fund is governed by its objective. And it's listed in the prospectus if any any mutual fund will have to respect this and you can read and say what is the objective of this fund what is it trying to do and an objective for example might be to invest in the high is dividend paying stocks of large companies in North America that's one object another fund my have an objective of I Will we want to invest in a small. Fast growing company. In the developing world of Southeast Asia so that's another object you see they're very different and they don't overlap but some of them do overlap. And so active mutual funds are frequently available and for one case. It's just you know an education savings accounts and things like that and they are easy to manage and that's why they are so popular so let's take a look at the scorecard here so mutual funds they are easy to understand in the sense that their objectives are very easy to understand and they are very clearly defined you can read the prospectus everything is very clearly defined out and they are highly regulated in the sense that there are a lot of protections so you're not being fooled. Mutual funds generally can beat inflation but because you have a fund manager that's sort of managing the assets in between you and for you and all of the other investors there's a cost associated with that and that cost is generally called the expense ratio but beyond the expense ratio a lot of mutual funds also tack on marketing costs they have what's called front side load and some of those costs can be above five percent So right off the top if you put in a one hundred dollars five dollars or more it can be just skimmed off the top before anything happens and so in most cases active mutual funds are very they're not low cost but it's interesting because it's already diversified the idea of a mutual fund is that many people with smaller amounts of assets can pool their asses together to have more diversification and also mutual funds are designed to punish speculators so you can't jump in and out you get punished for it and so it's a very non speculative asset class by design how much time does it take to manage it can literally be set and forget in your for one K.'s and those types of accounts especially you can set how much you want auto. Deducted every every month or every pay period and that's it it can be very quick. And then the acceptable amount of risk it's a matter of your personal risk tolerance but in general mutual funds have those risks very clearly spelled out for you and I have a red X here because there are certain fund objectives in and of themselves meaning some funds are designed to be highly risky and so you're going to be able to understand that but not all mutual funds are created equal and some of them I would not recommend And so that's why I have a red X. there liquidity wise mutual funds can be liquidated within one business day in most cases. But here's the big issue here is that because of the way that mutual funds are set up the fund manager manages the fund based on the agreed upon objective the charter right so we don't really have a say as investors we apply our money for the accomplishment of a certain goal that the fund prospectus spells out but how that goal is accomplished we don't have control over that and it's up to the fund manager and in most cases mutual funds you're not going to be able to know at any given time what assets are actually being held within the fund it's just not possible and so for that reason it is not possible to know with one hundred percent certainty what businesses what stocks or bonds what other assets are held in a mutual fund at a certain time so. That's a question you know I know certain people there are many people have. Discomfort with that and I think that's something appropriate to consider and to think through for yourself where you are on that and so I react this between six to seven points so it's a little bit higher than trading individual stocks. So for those who have had some concern over the more rally. Of mutual funds I do I mention this last session you if you weren't here I have a whole three part article series dealing with this specific issue the morality of mutual funds look it up on saving the crumbs dot com and it will come up. But there is a class of mutual funds so when we talk about socially responsible investing funds or SRI funds this is a subcategory of mutual funds and they work designed by concerned individuals about ethical investing they say we don't want mutual funds that can invest in things that we don't agree with so why not create mutual funds that have screens and filters based on our moral values and the general term that's used to socially responsible investing and there might be other terms as well out there but this is the most common one so this is a scorecard everything is the same it's not low cost it's just like a mutual fund perspective everything is the same everything is the same the risk everything is just a mutual fund except they also filter out things that don't match the moral filter but why do I still have a red X. there. The simple answer. Is that the filter. Are Not always I actually in fact I'll just say this I have yet to find an S. R. I mutual fund that has a screen that matches my own. So just because it's called an ethical fund it may not mean it abides by your own ethical standards so let me give you some examples OK. Here are a few fund examples there are what's called the Ave Maria funds so these are ethical funds SRI funds screened for Catholic values I'm not a Catholic so my values don't imply there are the whole funds. For Muslims you know there's certainly overlap between my values but there are a lot of things that they don't screen for that I would and then there's also the concept the biblically responsible investing versus socially responsible investing is there a difference in between those terms because let me give you this example when we think about biblically responsible we're thinking of biblical values when people say socially responsible investing they may not have anything to do with biblical values this is wealth simple wealth simple if you're on Facebook or even if you're on Facebook they might not be tardy but I have been targeted by well simple and I have been just blasted by their ads recently because they're a new technology based investment firm and one of the big claims to fame is ethical investing and so these are just two of their SRI funds and their objectives so let you can just use this as an example to see what they mean by when they say socially responsible so there's a carbon fund. Global stocks with a low carbon exposure than the broader market so you can understand for them that's a social responsibility issue but when I think about ethics the first thing that comes to mind is not carbon exposure. The next one is even more than a sounding It's called the she fund and screens for companies to achieve greater levels of senior leadership gender diversity. And of course what do they mean when they say gender. How many genders are they talking about so you can already see tech that there is a there is a tilt to a certain side of the spectrum if you will when you talk about socially responsible investing so just because a says it's socially responsible does not mean that it's good for our values but of course there are the Christian SRI funds they prefer to call the B R I funds biblically responsible investing not the biblical research institute So this is the Timothy plan the Timothy plan is one of the oldest evangelical Christian based. Mutual fund house and they have their own screen and this is a graphic that illustrates their principles by which they evaluate I know the text a small so I'll try to summarize for you so here are some of those screens number one life so abortion they filter out companies that commit abortion family entertainment so no violence language sex drugs things of that nature down here pornography purity so they screen out anything to do with pornography marriage lifestyle so this has to do with the biblical definition of marriage and things of that nature liberty so this is I'm a human rights slave labor human trafficking terrorism Christian persecution that's this principle and that alcohol here tobacco here and gambling here so we look at the screen and we're beginning to think yeah that's more like it we're not talking about carbon emissions and gender diversity but we're talking about more biblical values so this is Timothy plan and I think we can resonate more with that however. This is really fully in caps late and Adventist set of ethics because you know what's a big company that they invest in Starbucks. Starbucks is actually very high on most socially responsible indexes because they have they're very good with the environment they're good with human rights you know good with human rights is in quotes right. But they serve caffeine. Most people don't have a problem with that but we as Adventists we should whether we do or not but we should and not only that what about fast food restaurants. And then what about the weapons manufacturers and defense contractors you know they're not filtered here and so my point is not to say I'm not trying to throw these types of mutual funds under the bus I'm simply helping you understand why I could not give it a green X. OK Is that even though there are biblically responsible investment funds and socially responsible funds when we drill down into the actual filters that they use I have yet to find one to fully match is an Adventist set of values and. I think we're all friends here we understand that even within Adventism there are also variances as well so for an individual level ultimately comes down to individual conscience what we're comfortable with and I daresay that there's likely to not be something out there that's exactly going to match so that's again the question is up for you to determine between you and the Lord what your level of comfort is with some of these things I'm just sharing with you what some of those options are. So index funds OK let's move on this is another subset of mutual funds that are called index funds or passive funds what are they when we talk about the. Indexes you've all heard the news anchors talking about the Dow Jones Industrial Average the Nasdaq the S. and P. five hundred you all familiar with those terms Well those are all stock market indexes and what those are they are. A yardstick they're a third monitor for the health of the stock market that has been preassembled by a group of individuals or companies and they're just an agreed upon metric by which to measure the health of the market and so when people talk about the stock market is up or the stock market is down they're talking generally about the S. and P. five hundred Index So the index says it's up or the in that says it's down that's what they mean and so what in index funds do is instead of saying OK we're going to hire a fund manager to pick the funds or pick the stocks and to invest our money to best match the objective the objective of index funds are merely to reflect that index So in other words the most common index fund is the S. and P. five hundred Fund I mentioned that a couple times is the oldest and is the most popular what that index funds objective States is that we will match as closely as possible the S. and P. five hundred index and because it is just an index it doesn't require a lot of human effort it can be more or less automated and that's why they also called passive funds an active fund means there is a human being the has to be at the controls deciding when to buy or sell what you know doing research on things a passive fund merely says we're not trying to beat the market we're just trying to match the market and as a result of that they don't have to charge as much. And it becomes a lot more easily managed. So easy to understand just like a mutual fund objective is fairly easy to understand even easier in that it just tells you this is the index that we're trying to match that's it and they just you know reflect what is in that index can it be deflation It is the stock market essentially matches the stock market and so it can beat inflation is that low cost Well this was one of the biggest problems with mutual funds that are very costly and so index funds cut that cars down sometimes from one to two percent expense ratio for an active fund it can get down as low as zero or point zero three percent so for ten thousand dollar investment might cost you three dollars a year that's practically free for all intents and purposes. Is it diversified just like an active mutual fund it is not speculative it still has all the secure punishments for people who want to speculate how much time to take the Manage the same as before the risk would be approximately what would not have the red X. there anymore because it's just matching the index so you're simply riding the market you are simply saying I am going to invest in the U.S. Stock Market Economy liquidity wise it is also the same as mutual funds one business day you can liquidate and there is a special flavor of index funds I don't want to get make this too complicated but there's just a subset of index funds called E.T.F. that can be traded almost instantly so you can sell them any time the market is open you can get your money out instantaneously. But of course the moral clarity is the same as an active mutual fund because it's just reflecting the market up at you know whatever the index is whatever is in the index is going to be in the index fund and so that's also one of those things that we're not going to be happy able to have complete clarity but nevertheless overall it does add up to eight points so I told you before unfortunately there's no. Such Thing As A perfect investment. But the index fund does come up to eight out of nine points and just from for full disclosure. In my own personal retirement savings. My primary investment are index funds so that's what I have chosen to do and these are some of the most common the biggest and most familiar companies that offer index funds and they also have some advisement services that we talk about funded visors earlier they offer some. Some financial advising services as well and they all are required to be fiduciaries So something to consider so Vanguard is the largest mutual fund company in the world right now fidelity and Charles Schwab are also two other ones they all have index funds but these two down here betterment and wealth front are a new form of investment company it's called Fin Tech financial technology company so they're applying artificial intelligence and technology Internet technology to help give what's called robo advising so it's advisement based on your. Parameters that you give them and they have algorithms that automatically generate investment portfolios for you and adjust them on your behalf for a small fee so they are Intelligent Investing platforms and you can look them up for more information I have not used them but I have read a fair deal about them. So that's enough of our stock investing I feel like we did need to spend a little bit more time because that's what most of us are going to run into in our workplaces and whatnot but the second big one really is real estate So let's talk about real estate for a little bit. Whoops when I talk about real estate I'm just there are many ways to invest in real estate you can. Invest in land billboards public service. Personal storage units what have you but most of the time when we talk about real estate we're talking a buying a home a residence and renting it out it's also commercial real estate honest and but generally speaking you buy a home or duplex an apartment you fix it up you rent it out so that's what I'm talking about. Is real estate investing easy understand yes we all understand how rent works can't beat inflation surely yes it can is a low cost is well we I think we understand that to fix up a place to buy a place closing costs insuring it. Insuring it tax property taxes and things like that there are a lot of cost involved with owning property. Is a diversified and this is one of those things where. Makes real estate a little bit challenging for people who have low amounts of liquid assets so people with low earning potential it becomes very difficult to invest in real estate because the buy even one property you know could be hundreds of thousands of dollars but if there is the ability to diversify across multiple units even if all of those units are all in a similar geographic location is it still really diversified because let's say you have beachfront property you have five beach front property. On Puerto Rico. You might have been diversified across five properties but they're all in Puerto Rico and you're still not tremendously diversified even in that case so that's why real estate is very difficult diversified not speculative of course people can speculate in real estate but generally not how much time to manage being a landlord is can be you know very time consuming I think we know how that works is that an acceptable amount of risk I think most of the time when we think about real estate we think of it as very low risk is secured is a secured asset you know I have a piece of land there. But I do have a red X. there because whenever we inject large amounts of debt here is a theme again when we have a large mortgage on the on the property even if it is a secured asset. It's still a risk. And so whenever there's large amounts of debt I always you know up the risk factor liquidity we understand selling a property can take a long time but this is I believe one of the reasons why real estate is one the most popular types of investments for Adventists is that we can know we can screen exactly who are renting to we don't have to have any questions no fear that something inappropriate is happening but nevertheless some of these other things it adds up to four to five points. But I do want to mention a few statements here particularly in light of the end times that real estate has value not just for a financial investment perspective. Having us on page one forty one paragraph two fathers and mothers who possess a piece of land and a comfortable home are kings and queens that sounds a pretty good investment to be able to be kings and queens Agnes home three seventy three paragraph to educate our people to get out of the cities into the country where they can obtain a small piece of land and make a home for themselves and their children. Parents can secure small homes in the country with land for cultivation where they have orchards and where they can raise vegetables and small fruits to take the place of flesh meat God will help his people to find such homes outside the city this country living page twenty four Paragraph three So Ellen White makes the makes the case owning a piece of property with a small home out in the country we can grow your food is actually a very wise investment. All right let's continue so we have now real estate investment trust we're still on the theme of real estate and this is where we talk about how to invest in real estate without owning any physical real estate so. Real estate investment trusts also. Reviewed rate that's how you pronounce it rate it's a special type of business. That is basically a holding company for real estate properties and it doesn't have to be just real estate properties it could even be real estate mortgages and things but the Keep It Simple will just properties. And you can buy a share in that company and as a result then you can own a piece of all of those properties and their associated income that comes along with it and reads are specially treated under tax law which as long as they pay out ninety percent of the income that they generate at every year they have special tax benefits and so what that means is that they pay out a lot of dividends to their shareholders so as a real estate investment trust sometimes they pay as much as ten twelve percent every year in interest and they do that because. They have to to retain their tax benefits and reads also can come in different flavors so you can think of Reeds as sort of a mutual fund for actual physical real estate so there are wreaths that specialize in different niches and real estate one might be self storage units so you can buy one that just specializes in that some can be in temporal land some can be in billboards on the side of the road some can be in medical offices and then there are those that we probably would be interested in would be more hospitality that includes things like restaurants to serve alcohol and on and hotels and gambling casinos and things like that so real estate investment trust that's what they are and so going through our scorecard here are the easy to understand I believe they are fairly easy to understand can beat inflation yes just like real estate can are they low cost yes and no it sort of depends you can you can buy shares in them without commissions sometimes but generally you will. Is a diversified Yes because it's like a mutual fund your many different properties in one asset type is a non speculative Well people do speculate in them just like they do in stocks because they are sold in the stock exchanges how much time does it take to manage and put a red X. there because you're still going to have to do your homework to understand what those companies are investing in so what are what properties are they actually holding are they keeping true to their objective is an acceptable amount of risk Well there is the risk now of not just. Some people might think it is acceptable but the red X. there is because now you are investing in an intermediate So what if that holding company goes down right there is that risk that's concentrated in that one company that's holding those properties of course the liquidity is still there and then the moral clarity is yes and no it all depends on how much homework you're willing to do to investigate what is actually being held by those companies and so this is a broad range anywhere from four to eight points anywhere from four to eight points and so we do have a few more minutes so let me wrap up here with a few resources that I would recommend as we conclude and we have I believe we may have a few minutes for questions so here are a few books that I would. Recommend the first one here Labor kept investing for the future this is the only investing book on this list that's written from a Christian perspective so I definitely think you should start there even though I don't necessarily agree with everything that Larry Birkhead teaches but this one I think gives him good principles A Random Walk Down Wall Street is a thick book but it is the most authoritative book on this list from a financial perspective he's a highly degreed financial expert I think from Stanford University or some Ivy League school and it. You understand how the markets work and gives you a basis for understanding that the middle book of the white coat investor would be a good book for this crowd because it is a book by a doctor for doctors he's an M.D. emergency room physician and it's not just investing just because the title is white code investor that's just sort of the you know pseudonym he gave them so he gave himself it's really a whole holistic guide to personal finance and investing from a physician's perspective I think they give he gives a lot of good insights this book up here the simple path to wealth by jail Collins is a great introductory book so if you want something that is real a light read has a lot of stories but gives you a good framework of how investing works this is the this is the place to start you can finish it finish the book in an afternoon he's got a really easy to read style and then this one here by John C. Bogle John Bogle is the founder of Vanguard Corp the largest mutual fund house in the world right now with some four or five trillion dollars of under management He's a guy who invented index funds he's a guy who basically is the grandfather of it all and this is his Little Book of Common Sense Investing which basically explains the theory behind index funds and why they are superior than actively managed funds. And there are also some websites I would recommend saving the chromosome com Saving the crumbs out Camas our personal website mention that before the white coat investor if you don't want to buy the book trying to save you some money if you don't want to buy the book his website contains all the principles that are in the book it's just not organized in such a easy to read manner you have to click around but it's there Mr Money Mustache is one of my personal favorite websites on the Internet he's. He is very funny but you know be be aware he he comes from a humanist. Dick naturalist world view he's not a Christian at all so you can have to filter out the filth but he has some good insights and good good nuggets and then J.L. Collins and H.S. after New Hampshire where he's from dot com is the gentleman who wrote the simple past the well and in the same way all of the information in the book is available on his website so if you want to just save some money don't buy the book just go to his website OK well let us conclude with prayer so we can make room for our next seminar coming in thank you for your time Father in heaven thank you for being with us this afternoon I hope some of these practical things even though it might seem a little dry and in certain ways hopefully we can see the options that are available to us you have given for us to increase your talents and I pray that we will be wise stewards and that we might be faithful and all that we do to give glory to you bless us the remainder of this afternoon and be with remainder of the seminars that are going on as well we pray to Jesus. This media was brought to you by audiotapes a website dedicated to spreading God's word through free sermon audio and much more if you would like to know more about how do you verse or if you would like to listen to more servant leader Visit W W W dot. Org.

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