Thursday, May 21, 2015
Are your advisers making the news?
At deVere Group (the company I work for), we are accustomed to be featured in the international, national, regional and local media worldwide countless of times.
Contrary to do it yourself brokers and small firms ( consider that our second closest competitor is 10 times smaller than us) we are an internationally recognized (and award winning) organization.
Here is just a flavour of the deVere Group’s coverage last month (April 2015):
Pre-general UK election commentaries on financial matters from deVere founder and CEO, Nigel Green, were covered by The Sun, BBC Radio 4 FT Adviser, International Adviser, YourMoney, Global Banking & Finance Review, Business Money, Khaleej Times, Money Observer, Money Wise, Le Temps, SUR, Money Management, Investors Chronicle (page 24) and Biz Community, amongst others. Mr Green was also invited to write a column on Labour’s non-dom plans for Private Banker Internationalmagazine.
The Daily Express , The Times, The Finance Times, Singapore News, and Pensions Age magazine (page 42) to highlight just a few media outlets, ran features on deVere Group’s warning regarding the rising threat of pension liberation scams.
Simon Chrystal from deVere’s Workplace Solutions authored a column on the recent overhaul of the pensions landscape for The C Suite, and The Telegraph published the video interview he filmed at The Telegraph Studios.
When deVere Mortgages reported that three out of four enquiries were from overseas buyers in the first quarter of the year, The Telegraph, Property Wire, International Adviser, What Mortgage, Choices Today, The Move Channel, Relocate Magazine, Financial Reporter and others produced articles on the findings.
In April deVere’s International Investment Strategist, Tom Elliott, commented on the IMF’s warning about the Fed’s inevitable rate rise. His advice was picked up by World Finance, The Herald, The Wall St Cheat Sheet and Mindful Money, amongst others.
Mr Elliott was also quoted in a report by the FT’s fDi (page 64), IFA Magazine, The National and appeared on CNBC.
Reports in Bloomberg, Global Banking & Finance Review, Euro Investor, and The Business Information Portal covered news of deVere’s recent awards and accolades; the Daily Express quoted deVere United Kingdom’s Head of Financial Planning, Kevin White on tips regarding overseas retirement, The Telegraph wrote about the deVere Switzerland sponsored Geneva Charity Ball, and FT Adviser quoted deVere’s Mike Coady on the latest developments in the QROPS market.
Thursday, May 7, 2015
And the Winner is...
Congratulations to our CEO for being recognized as Ops Business Person of the Year by the prestigious Financial Technology Forum, a news also reported on Bloomberg as you can see below:
Is your financial advisory company award winning?
Wednesday, April 22, 2015
Safe, Creative or Trashy?
First of all let me disgress for a second as the 2015 awards results are now also on-line!
Other winners here include the likes of Google and Apple so we are in good company ;)
You can check the whole results in the electronic version of the magazine here (our CEO on the cover): http://www.corporatelivewire.com/innovation-and-excellence-awards.html
Now on with the main article...
When we meet new clients that have been doing investments for a while, we found that they generally fall into 3 categories, mainly those that prefer the "the risky way", those that prefer the "creative" way and those that prefer (or "believe" they are practicing) The Safe WAYtm.
The risky way sees people either taking bets on stocks they sympathize with, or following the leads of "savvy" friends and "street wise" Joe Brokers belonging to no particular organization or information network (yeah those that advised you not to let go of those Oil funds).
In 15 years on the markets I have never seen a single individual keeping the profits done this way.
Some lasted a year, some 2 years, some 10 years, they all lost a big chunk or eventually, all of their money.
"Keeping" being the key word here, for it doesn`t matter how much you earn or have, it only matters how much you keep in the end.
The Creative Way, is for those who have little sympathy for the standard financial markets and go investing into Student Housing projects or time unproven small business financing schemes.
Now if there is one thing you should learn from the difference between Warren Buffet and Jordan Belfort (the wolf of wall street) is that in the long run, proven solid business pays, creative Joe Nobody`s companies/ventures don`t.
Then there is the so called Safe Way: some clients of mine were under the rather bizarre impression that keeping their investments in Italy, although they expatriated, was a good Idea, their wife`s, friends, dads and bros all said so after all.
Fipaperam, Fipeco, UniDebit (gotta love the fictional names ;) ) you get the idea.
Problem is, Italy is a member of PIGS and in the 2014 ECB bank stress test, Italian banks had some of the highest levels of failures.
Should a crisis strike, your money might be at risk there make no mistake about it (I won`t even start on how preemptive capital gain tax settlements the various "Fibecos" perpetrate hinder your growth, I wrote a full article about it).
The point is, ladies and gentlemen, that there is FAR better.
Elite investor always had access to far more solid institutions that offer better conditions and better guarantees. Not only because the countries in which they operate are richer and less debt burdened, but because they also give you full insurance by mega Swiss behemoths.
When you couple that with free access to top money managers who`s organizations have proven solid results in all market conditions for the past 40 years, you may get an idea as of why you will be getting something better than do it yourself, Joe Zillo`s venture or Luigi, personal Banker from MedioMilanum.
What?? The only companies that fit the description, take only institutional clients you say? Indeed, that is why you need access to an organization that secured exclusive rights to liaise between you and them.
You can check the whole results in the electronic version of the magazine here (our CEO on the cover): http://www.corporatelivewire.com/innovation-and-excellence-awards.html
Now on with the main article...
When we meet new clients that have been doing investments for a while, we found that they generally fall into 3 categories, mainly those that prefer the "the risky way", those that prefer the "creative" way and those that prefer (or "believe" they are practicing) The Safe WAYtm.
The risky way sees people either taking bets on stocks they sympathize with, or following the leads of "savvy" friends and "street wise" Joe Brokers belonging to no particular organization or information network (yeah those that advised you not to let go of those Oil funds).
In 15 years on the markets I have never seen a single individual keeping the profits done this way.
Some lasted a year, some 2 years, some 10 years, they all lost a big chunk or eventually, all of their money.
"Keeping" being the key word here, for it doesn`t matter how much you earn or have, it only matters how much you keep in the end.
The Creative Way, is for those who have little sympathy for the standard financial markets and go investing into Student Housing projects or time unproven small business financing schemes.
Now if there is one thing you should learn from the difference between Warren Buffet and Jordan Belfort (the wolf of wall street) is that in the long run, proven solid business pays, creative Joe Nobody`s companies/ventures don`t.
Then there is the so called Safe Way: some clients of mine were under the rather bizarre impression that keeping their investments in Italy, although they expatriated, was a good Idea, their wife`s, friends, dads and bros all said so after all.
Fipaperam, Fipeco, UniDebit (gotta love the fictional names ;) ) you get the idea.
Problem is, Italy is a member of PIGS and in the 2014 ECB bank stress test, Italian banks had some of the highest levels of failures.
Should a crisis strike, your money might be at risk there make no mistake about it (I won`t even start on how preemptive capital gain tax settlements the various "Fibecos" perpetrate hinder your growth, I wrote a full article about it).
The point is, ladies and gentlemen, that there is FAR better.
Elite investor always had access to far more solid institutions that offer better conditions and better guarantees. Not only because the countries in which they operate are richer and less debt burdened, but because they also give you full insurance by mega Swiss behemoths.
When you couple that with free access to top money managers who`s organizations have proven solid results in all market conditions for the past 40 years, you may get an idea as of why you will be getting something better than do it yourself, Joe Zillo`s venture or Luigi, personal Banker from MedioMilanum.
What?? The only companies that fit the description, take only institutional clients you say? Indeed, that is why you need access to an organization that secured exclusive rights to liaise between you and them.
Thursday, April 16, 2015
In or Out
It`s that time of the market cycle again, the US stocks that have been leading the world`s economic recovery have been going side-ways for sometime, and they don`t seem to be able to further run.
At this point, with the Bull market long in the tooth and the Fed`s hike around the corner, history tells us that a big swing is going to take place in the coming months, probably in concert with the aforementioned interest rate rise (nothing too surprising there), but what everybody`s questioning is: will it be a correction or a crash?
Both fundamentals and historical data points just to a correction, there are many indicators still pretty strong, just to name a few, the Bonds yield curve has not inverted (something that signals market crashes) copper price is on the rise (a good sign due to several reasons) and we have on going stock buy backs and mergers in the USA with easing of the monetary policies taking place in Europe, Japan and to a lesser extent, in India and China.
The Japanese Government is pouring more than 3 trillion yen into Japanese stocks with the nikkei on the run, and the Hong Kong index went crazy now that Chinese firms can pour money into it.
So what is going to happen?
We will experience some turmoil, it won`t be a crash, but it can set back the profits you made up until now.
So you do need to update that portfolio of yours, there`s no way around it.
Don`t believe those that tell you "just keep it as is" because they are the same people who told their clients not to sell their funds based on oil and natural resources last year, which still havent`t recovered.
Their rationale is that "it will eventually go up again", the problem is, we had several FANTASTIC opportunities in the past months, you could have gained 20% on those (up from/on top of your previous heights!), instead you lost 50% on those and still waiting for them to go back to normal.
I believe you agree with me that even if they do get back to normal, you would still have been involved in big a waste of time and money by lazy advisers with no information network at their disposal.
"but no, I recovered eventually, so I didn`t lose money" Sadly it is the opposite, as I wrote HERE, unrealized gains are worth far more than you might be lead to believe.
If you move now you can keep your profits, hedge out a few points even during the correction, and take the subsequent rise from the start, the earning potential is HUGE.
Act!
The blue line is an example of sideway movement.
At this point, with the Bull market long in the tooth and the Fed`s hike around the corner, history tells us that a big swing is going to take place in the coming months, probably in concert with the aforementioned interest rate rise (nothing too surprising there), but what everybody`s questioning is: will it be a correction or a crash?
Both fundamentals and historical data points just to a correction, there are many indicators still pretty strong, just to name a few, the Bonds yield curve has not inverted (something that signals market crashes) copper price is on the rise (a good sign due to several reasons) and we have on going stock buy backs and mergers in the USA with easing of the monetary policies taking place in Europe, Japan and to a lesser extent, in India and China.
The Japanese Government is pouring more than 3 trillion yen into Japanese stocks with the nikkei on the run, and the Hong Kong index went crazy now that Chinese firms can pour money into it.
So what is going to happen?
We will experience some turmoil, it won`t be a crash, but it can set back the profits you made up until now.
So you do need to update that portfolio of yours, there`s no way around it.
Don`t believe those that tell you "just keep it as is" because they are the same people who told their clients not to sell their funds based on oil and natural resources last year, which still havent`t recovered.
Their rationale is that "it will eventually go up again", the problem is, we had several FANTASTIC opportunities in the past months, you could have gained 20% on those (up from/on top of your previous heights!), instead you lost 50% on those and still waiting for them to go back to normal.
I believe you agree with me that even if they do get back to normal, you would still have been involved in big a waste of time and money by lazy advisers with no information network at their disposal.
"but no, I recovered eventually, so I didn`t lose money" Sadly it is the opposite, as I wrote HERE, unrealized gains are worth far more than you might be lead to believe.
If you move now you can keep your profits, hedge out a few points even during the correction, and take the subsequent rise from the start, the earning potential is HUGE.
Act!
Thursday, April 9, 2015
How to choose a Financial Advisory Company
In a world where everybody wants to give financial advices, choosing a good Financial Advisory Company might be a difficult task, however a good financial adviser has the potential of opening possibilities you might not ever come to know otherwise, something that might have a huge positive impact on your finances.
In this post I will tell you about Information Network, possibility to access what you wouldn`t be able to otherwise, international recognition and global presence, all using questions you should ask yourself in order to choose who should advice you from now on.
First Question: Do you know what kind of information is available to your adviser?
In other words, is your financial adviser/broker "in" on the latest developments going on behind the scenes? If he doesn`t have privileged access to certain information channels then I wouldn`t trust him with my money.
To make an example, the company I work for (deVere Group incidentally the largest independent firm in the world) is the only financial advisory company to have dedicated "internal" sections, inside Goldman Sachs and Morgan Stanley websites, we are in their information network, also receiving important and often classified, timely info.
We also have special arrangements on this regard with Fidelity, Deutsche Bank, the Asian Development Bank and more.
Third Question: is your adviser firm/broker award winning?
The
printed literature is just out, it will be shipped to 1.5 million
company executives world wide, with our CEO on the Cover (watch out this
LINK
for the news, 2015 results are not on line yet,)
Update: the award news appeared on the 13th of April on UK Business Information Portal -> LINK
deVere Group CEO has also being nominated as Ops Business Person of the Year by the authoritative Financial Technologies Forum (click HERE to read the news on Bloomberg).
What awards or worldwide recognition did your adviser/broker win? Any privileged access to Investment Banks products or info?
The 4th question would be "Global Presence", is your adviser part of a global network with proper license and local law departments everywhere on the globe?
Here is a list of deVere worldwide offices: LINK (note: we don`t have temporary premises or small facilities, all of our offices take the whole floor of a building or more).
To sum it up:
My advice? For more security in your future go beyond the usual. Expand your reaches, be curious, never settle with what you have without looking at better options.
As usual, if you would like to know what we do for our clients, just drop me a line here, on my work mail or on linked in, I will be glad to fill you in on what`s going on with the markets what solutions the big guys (read: Money Managers/Insurance companies etc.) are adopting, and how you can take advantage of the same solutions too.
In this post I will tell you about Information Network, possibility to access what you wouldn`t be able to otherwise, international recognition and global presence, all using questions you should ask yourself in order to choose who should advice you from now on.
First Question: Do you know what kind of information is available to your adviser?
In other words, is your financial adviser/broker "in" on the latest developments going on behind the scenes? If he doesn`t have privileged access to certain information channels then I wouldn`t trust him with my money.
To make an example, the company I work for (deVere Group incidentally the largest independent firm in the world) is the only financial advisory company to have dedicated "internal" sections, inside Goldman Sachs and Morgan Stanley websites, we are in their information network, also receiving important and often classified, timely info.
We also have special arrangements on this regard with Fidelity, Deutsche Bank, the Asian Development Bank and more.
Second question: can you or your financial advisory company access all the financial vehicles available out there?
For example, what if the Tokyo Metropolitan Government is
doing business with a big financial institution which offers them great terms, but
that company only works with Institutional Clients, can you take
advantage of the same company and terms as an individual?
they have access to it, do you?
deVere Group gives retail clients access to wholesale banking solutions thanks to exclusive partnerships, 90% of our clients never even heard of 12% a year fixed interest coupons, with guaranteed capital, if you haven`t heard about them too, you are not alone but you have been missing out. (if you want to know more about these just drop me a line).
Third Question: is your adviser firm/broker award winning?
This year the company I work for (deVere Group), just won the award for
Best Financial Advisory Firm in the prestigious Corporate LiveWire Global Awards (Wired Network) Innovation and Excellence section.
Update: the award news appeared on the 13th of April on UK Business Information Portal -> LINK
deVere Group CEO has also being nominated as Ops Business Person of the Year by the authoritative Financial Technologies Forum (click HERE to read the news on Bloomberg).
What awards or worldwide recognition did your adviser/broker win? Any privileged access to Investment Banks products or info?
The 4th question would be "Global Presence", is your adviser part of a global network with proper license and local law departments everywhere on the globe?
Here is a list of deVere worldwide offices: LINK (note: we don`t have temporary premises or small facilities, all of our offices take the whole floor of a building or more).
Can you access a list of offices of your adviser?
To sum it up:
- Information Network
- Access to top level solutions (often not available to retail clients) and Top Tier Fund Managers (would you want one of the Top 5 money managers in the world to directly manage your money?).
- Award Winning
- Global Presence
My advice? For more security in your future go beyond the usual. Expand your reaches, be curious, never settle with what you have without looking at better options.
As usual, if you would like to know what we do for our clients, just drop me a line here, on my work mail or on linked in, I will be glad to fill you in on what`s going on with the markets what solutions the big guys (read: Money Managers/Insurance companies etc.) are adopting, and how you can take advantage of the same solutions too.
Tuesday, April 7, 2015
2015: Where is the market Going?
In my First series of posts I concentrated on common "positioning" mistakes people generally do during their lifetimes, which might end up jeopardizing how much money you will have at your disposal during retirement (a very important subject), today however not only I will be talking investments but will be very specific in talking about year 2015.
The current monetary policy cycle is unique in terms of the degree and duration of easing, which raises the question: Is this time different?
We at deVere, think this cycle has more similarities than differences with prior cycles, and so an historical analysis is a useful template.
We think Fed tightening (aka: interest rate rise) this year will drive volatility in asset prices, which otherwise benefit from the effects of an increasingly healthy economic growth cycle.
In general, based on cross referenced historical data, we expect Treasuries to weaken, US Equities to struggle immediately after the hike, Credit to spread, the US dollar to further strengthen which, in turn, will further weaken commodities.
What does this all mean in laymen terms?
It means that if you don`t adjust your portfolio accordingly you will lose much (or all) the gains of the lasts months.
So the question is: has your Bank/Broker/Financial adviser told you about it and suggested the right strategy for you to profit in the turbulent coming months?
If not, act fast, ask for help, (if you want me to help you out, drop me a line via email or on linked in) whatever you do, do it quickly as changing things 1 months into the correction will not have the same impact (it might even be too late).
The current monetary policy cycle is unique in terms of the degree and duration of easing, which raises the question: Is this time different?
We at deVere, think this cycle has more similarities than differences with prior cycles, and so an historical analysis is a useful template.
We think Fed tightening (aka: interest rate rise) this year will drive volatility in asset prices, which otherwise benefit from the effects of an increasingly healthy economic growth cycle.
In general, based on cross referenced historical data, we expect Treasuries to weaken, US Equities to struggle immediately after the hike, Credit to spread, the US dollar to further strengthen which, in turn, will further weaken commodities.
What does this all mean in laymen terms?
It means that if you don`t adjust your portfolio accordingly you will lose much (or all) the gains of the lasts months.
So the question is: has your Bank/Broker/Financial adviser told you about it and suggested the right strategy for you to profit in the turbulent coming months?
If not, act fast, ask for help, (if you want me to help you out, drop me a line via email or on linked in) whatever you do, do it quickly as changing things 1 months into the correction will not have the same impact (it might even be too late).
Monday, April 6, 2015
How Tax deferral works... (MUST READ)
In a previous post I mentioned how the real secret of Warren Buffet riches is tax deferral, so what is exactly tax deferral and how does it differ from tax evasion?
First things first, Tax deferral is legal while tax evasion is not.
With the first you still promise you are going to pay your capital gain tax in full (let`s say 20% like in Japan) by the the time you cash everything in, but you postpone this payment till the last minute.
Some of you might be thinking "but if in the end I am going to pay anyway what`s the difference? and why go through the hassle?"
The difference is that at the end of day you will be left with what`s pictured below...
Let`s see how you get this extra cash with an example. Mark and Phil two colleagues at the same company, both with $100.000 to invest.
Phil gives his money to a local bank, where they promise a gross 9% of interests (9% from a Bank??? yeah right... but... let`s just say they can for example sake...) from which, each year the 20% capital gain tax is automatically detracted (even if you do stock trading using a local platform, when you sell the stocks and cash the money in, they take 20% off the gain automatically, no questions asked no other options).
Mark on the other hand gives the money to a good IFA (International Financial Adviser) and will pay the 20% at the very end, behold the amazing thing that happens below:
At Year 01 Phil starts with $100.000 and after 12 months, at 9% growth, he reaches $109.000, but he has to pay taxes so minus (-) 20% Capital gain tax he's left with $107.200
Thus Year 02 starts with $107.200 which at 9% = $116.830 - 20% CapitalGain Tax = $114.904
(note that every year the capital gain tax is calculated only on the amount of capital gain generated that year)
Year 03: $114.904 at 9% = $125.245 - 20% CapitalGain Tax = $123.176
Year 04: $123.176 at 9% = $134.261 - 20% CapitalGain Tax = $132.044
Year 05: $132.044 at 9% = $143.127 - 20% CapitalGain Tax = $141.689
So after 5 years Phil is sitting on $141.689, let`s see how Mark would be doing in case he decides to cash in his investment (which is growing tax free at the moment) after 5 years.
Due to the magic of compound interests he gets $56.568 of growth, ($156.568 total) and after paying 20% of capital gain tax he's left with 145.254, almost $4000 more in his pockets.
Although they are both tax compliant, by just being smart, Mark is going to Yodobashi Camera and get a 60" 4K TV "for free" ;)
Now, how much would the difference be after 10 years? $8000 I hear? NOT - EVEN - CLOSE
The difference after 10 years is a staggering $29.000!!!
Again here are the calculations:
Year 06 starts at $141.689 for Phil, at 9% = $154.441 - 20% CapitalGain Tax = $151.890
Year 07: $151.890 at 9% = $165.560 - 20% CapitalGain Tax = $162.826
Year 09: $162.826 at 9% = $177.480 - 20% CapitalGain Tax = $174.549
Year 10: $174.549 at 9% = $190.258 - 20% CapitalGain Tax = 187.116
Mark, with tax free growth reaches 245.135 if he decides to cash in, he pays his 20% and he's left with $216.108 a $29.000 difference even though they both paid 20% of taxes and are 100% compliant.
Now Mark can get a pretty decent car with the extra money...
You see where I am getting but let`s make one last projection to 20 years just for fun!
(you can skip below to see the results, I won`t tell anyone ;) )
Year 11 for Phil starts at $187.116 at 9% he gets $203,956 - 20% Capital gain tax, he's left with $200.588
Year 12: $200.588 at 9% = $218.640 - 20% CapitalGain Tax = $215,030
Year 13: $205.030 at 9% = $224.382 - 20% CapitalGain Tax = $220.511
Year 14: $220.511 at 9% = $240,356 - 20% CapitalGain Tax = $236,387
Year 15: $236.387 at 9% = $257.661 - 20% CapitalGain Tax = $253,406
Year 16: $253.406 at 9% = $276.212 - 20% CapitalGain Tax = $271.650
Year 17: $271.650 at 9% = $296.098 - 20% CapitalGain Tax = $291.208
Year 19: $291.208 at 9% = $317.416 - 20% CapitalGain Tax = $312,174
Year 20: $312.174 at 9% = 340.269 - 20% CapitalGain Tax = 334.650
So it`s time to retire, Phil looks at his pot and sees $334.650, he paid taxes every year, on the other end Mark reaches a gross total of $560.441 due to the exponential effect of (tax free) compound interests, he cashes in and pays 20% capital gain tax on the whole growth which sets him back a whopping $92.088, the good news is, he is left with $468.352, he paid his taxes just like Phil, and yet, he is $133.702 richer.
So, who do you want to be in your life, Mark or Phil?
P.S
I forgot to mention that at the very last year Mark changed his residence to a place where there are no capital gain taxes whatsoever (in the end you don`t know where you will be 20 years from now and you can decide for yourself...)
First things first, Tax deferral is legal while tax evasion is not.
With the first you still promise you are going to pay your capital gain tax in full (let`s say 20% like in Japan) by the the time you cash everything in, but you postpone this payment till the last minute.
Some of you might be thinking "but if in the end I am going to pay anyway what`s the difference? and why go through the hassle?"
The difference is that at the end of day you will be left with what`s pictured below...
Do you want them too? Then read on!
Let`s see how you get this extra cash with an example. Mark and Phil two colleagues at the same company, both with $100.000 to invest.
Phil gives his money to a local bank, where they promise a gross 9% of interests (9% from a Bank??? yeah right... but... let`s just say they can for example sake...) from which, each year the 20% capital gain tax is automatically detracted (even if you do stock trading using a local platform, when you sell the stocks and cash the money in, they take 20% off the gain automatically, no questions asked no other options).
Mark on the other hand gives the money to a good IFA (International Financial Adviser) and will pay the 20% at the very end, behold the amazing thing that happens below:
At Year 01 Phil starts with $100.000 and after 12 months, at 9% growth, he reaches $109.000, but he has to pay taxes so minus (-) 20% Capital gain tax he's left with $107.200
Thus Year 02 starts with $107.200 which at 9% = $116.830 - 20% CapitalGain Tax = $114.904
(note that every year the capital gain tax is calculated only on the amount of capital gain generated that year)
Year 03: $114.904 at 9% = $125.245 - 20% CapitalGain Tax = $123.176
Year 04: $123.176 at 9% = $134.261 - 20% CapitalGain Tax = $132.044
Year 05: $132.044 at 9% = $143.127 - 20% CapitalGain Tax = $141.689
So after 5 years Phil is sitting on $141.689, let`s see how Mark would be doing in case he decides to cash in his investment (which is growing tax free at the moment) after 5 years.
Due to the magic of compound interests he gets $56.568 of growth, ($156.568 total) and after paying 20% of capital gain tax he's left with 145.254, almost $4000 more in his pockets.
Although they are both tax compliant, by just being smart, Mark is going to Yodobashi Camera and get a 60" 4K TV "for free" ;)
Now, how much would the difference be after 10 years? $8000 I hear? NOT - EVEN - CLOSE
The difference after 10 years is a staggering $29.000!!!
Again here are the calculations:
Year 06 starts at $141.689 for Phil, at 9% = $154.441 - 20% CapitalGain Tax = $151.890
Year 07: $151.890 at 9% = $165.560 - 20% CapitalGain Tax = $162.826
Year 09: $162.826 at 9% = $177.480 - 20% CapitalGain Tax = $174.549
Year 10: $174.549 at 9% = $190.258 - 20% CapitalGain Tax = 187.116
Mark, with tax free growth reaches 245.135 if he decides to cash in, he pays his 20% and he's left with $216.108 a $29.000 difference even though they both paid 20% of taxes and are 100% compliant.
Now Mark can get a pretty decent car with the extra money...
You see where I am getting but let`s make one last projection to 20 years just for fun!
(you can skip below to see the results, I won`t tell anyone ;) )
Year 11 for Phil starts at $187.116 at 9% he gets $203,956 - 20% Capital gain tax, he's left with $200.588
Year 12: $200.588 at 9% = $218.640 - 20% CapitalGain Tax = $215,030
Year 13: $205.030 at 9% = $224.382 - 20% CapitalGain Tax = $220.511
Year 14: $220.511 at 9% = $240,356 - 20% CapitalGain Tax = $236,387
Year 15: $236.387 at 9% = $257.661 - 20% CapitalGain Tax = $253,406
Year 16: $253.406 at 9% = $276.212 - 20% CapitalGain Tax = $271.650
Year 17: $271.650 at 9% = $296.098 - 20% CapitalGain Tax = $291.208
Year 19: $291.208 at 9% = $317.416 - 20% CapitalGain Tax = $312,174
Year 20: $312.174 at 9% = 340.269 - 20% CapitalGain Tax = 334.650
So it`s time to retire, Phil looks at his pot and sees $334.650, he paid taxes every year, on the other end Mark reaches a gross total of $560.441 due to the exponential effect of (tax free) compound interests, he cashes in and pays 20% capital gain tax on the whole growth which sets him back a whopping $92.088, the good news is, he is left with $468.352, he paid his taxes just like Phil, and yet, he is $133.702 richer.
So, who do you want to be in your life, Mark or Phil?
P.S
I forgot to mention that at the very last year Mark changed his residence to a place where there are no capital gain taxes whatsoever (in the end you don`t know where you will be 20 years from now and you can decide for yourself...)
Tuesday, March 31, 2015
Trust me
In the last series of posts I highlighted how feeling "too" safe might be deleterious in the (not so) distant future, if you hit a school bus with your car no insurance company will cover the amount of damages, if the IRS or Italian GdF make a random search (with parameters) they will find your name popping up very easily (international databases are now shared and searchable without request by certain institutions) I also introduced the Trust which have existed since Roman times and have become one of the most important innovations in property law.
So what is a Trust, what are the major benefits and how do you get one?
A Trust is an arrangement whereby a property (of any kind) is held by a nominee for the benefit of another. In the past they were formed by a notary office (they still are but with some additions), and the Trustees would have to be provided by the client which ended up in the formers always being people closely connected with the latter.
Nowadays though, to aid confidentiality, it`s big corporations that act as Trustees (or nominee if you wish), so whereby trustees indicated in the old fashioned way were connected to a single settlor/beneficiary (if your brother is a trustee, the number of people he can be the trustee of is rather limited wouldn`t you agree?), that connection is no longer there nowadays as the same corporation act as trustee for thousands of people.
The client as said before can be both the settlor and beneficiary, but his name will not be on any public record or data base, nor any property that is settled inside the Trust, this way not only you can dispose of things in all privacy, you can also rest assured that no claim can be made against them.
If you lend your car to aunt Betty and she crashes into a school bus, the only things that are liable are the crashed car and poor aunt Betty (supposing she is still alive).
If your ex employee wants 160 million dollars in damages (like Ellen Pao) and the judge rules in his/her favor going after your properties, he will probably have to do with that same crashed car. If some organization does a data base search you won't be in it.
As a Trust is not made public, upon your death, your estate will be distributed in private. A will, on the other hand, is public record and all transactions will be public as well. There will be death/inheritance taxes and probation (none of that with a Trust, your heirs get everything immediately and you can even decide how and when they get it).
You can set a trust in a couple of weeks with the help of a financial adviser.
At this point you must probably be thinking "It sounds all fine and dandy but how much does it cost?"
In certain circumstances it could even be free of charge, and if you want to do it with a major corporation, you could set it up for just GBP 299 (includes Trust Deed, Due Diligence and Formation) and then pay less then a coffee a day to keep it running, what it saves you in the form of tax efficiency (let me know if you want to know more on this) and liabilities avoidance, is worth thousands of times more.
If you don`t have a Trust your actual position is similar to a sitting duck, where the hunters are all the calamities out there aiming at you right now or in the future (you know how lazy hunters are, if your the only sitting duck in their pond guess who are they gonna shoot at...?).
Better put your self in a safer position, no matter who you do it with, you are going to thank me later...
So what is a Trust, what are the major benefits and how do you get one?
A Trust is an arrangement whereby a property (of any kind) is held by a nominee for the benefit of another. In the past they were formed by a notary office (they still are but with some additions), and the Trustees would have to be provided by the client which ended up in the formers always being people closely connected with the latter.
Nowadays though, to aid confidentiality, it`s big corporations that act as Trustees (or nominee if you wish), so whereby trustees indicated in the old fashioned way were connected to a single settlor/beneficiary (if your brother is a trustee, the number of people he can be the trustee of is rather limited wouldn`t you agree?), that connection is no longer there nowadays as the same corporation act as trustee for thousands of people.
The client as said before can be both the settlor and beneficiary, but his name will not be on any public record or data base, nor any property that is settled inside the Trust, this way not only you can dispose of things in all privacy, you can also rest assured that no claim can be made against them.
If you lend your car to aunt Betty and she crashes into a school bus, the only things that are liable are the crashed car and poor aunt Betty (supposing she is still alive).
If your ex employee wants 160 million dollars in damages (like Ellen Pao) and the judge rules in his/her favor going after your properties, he will probably have to do with that same crashed car. If some organization does a data base search you won't be in it.
As a Trust is not made public, upon your death, your estate will be distributed in private. A will, on the other hand, is public record and all transactions will be public as well. There will be death/inheritance taxes and probation (none of that with a Trust, your heirs get everything immediately and you can even decide how and when they get it).
You can set a trust in a couple of weeks with the help of a financial adviser.
At this point you must probably be thinking "It sounds all fine and dandy but how much does it cost?"
In certain circumstances it could even be free of charge, and if you want to do it with a major corporation, you could set it up for just GBP 299 (includes Trust Deed, Due Diligence and Formation) and then pay less then a coffee a day to keep it running, what it saves you in the form of tax efficiency (let me know if you want to know more on this) and liabilities avoidance, is worth thousands of times more.
If you don`t have a Trust your actual position is similar to a sitting duck, where the hunters are all the calamities out there aiming at you right now or in the future (you know how lazy hunters are, if your the only sitting duck in their pond guess who are they gonna shoot at...?).
Sunday, March 29, 2015
The Friend that outlasted Fido...
Ahh, changes, most people don't like them, a few embraces them and even less prepare themselves for their inevitable coming, the latter out of an ephemeral sensation of security, that seems to be there only to blind us from seeing the bitter reality of things nowadays.
BUT, in a globalized world where big companies once secure are now on the verge of bankruptcy and being bought by Arabian or Chinese firms, with the whole thing happening under the eyes of indebted governments only looking for ways to recover money in order to pay interests on their debts (with banks helping them out on their quest by whistle blowing your private business to them) can you be sure there is anyone out there really looking out for you?
What about the rest of the things I mentioned above?
Let me tell you about Mark (fictional name, but true story, a real case study if you wish) he married the love of his life, landed a dream job, bought a puppy of his favorite breed of dogs and started saving with the help of a good financial adviser.
Eventually he quit his job and went to business with his best friend Joe.
Life was looking up, plenty of love and money flowing in, what could go wrong? Well in 15 years he divorced his wife, had several fights with his best friend on business quarrels eventually leading to a company split. At least he was able to keep Fido.
You see, that's the great thing about dogs, no matter the circumstances they are always there waiting for you at home with a wagging tail (gotta love'em) their only problem being... they are short lived (18years if you are lucky) but they are worth all the effort and give back more than they receive.
Now then, wouldn't it be great if in addition, there was something else out there with similar characteristics?
Returning to the story of Mark, poor Fido eventually died of old age and so did Mark`s parents, at that point he would have been left alone at the mercy of demanding divorce lawyers and blood sucking institutions if it wasn't for the fact that at a certain point during the early years, Mark followed his Financial Adviser suggestion to put his holdings inside a Trust (everything except for the liquidity needed for everyday life and later, to run things) enjoying tax free growth on his savings and asset protection (not to mention that thanks to absolute confidentiality he didn't even have to litigate such assets during divorce procedures).
He was able to re-marry, have 2 beautiful baby daughters and get a new puppy. He is still saving into a Trust and in full control of his life.
Whether we like it or not, there are no guarantees that the people currently in our lives will stick till the end, and after our parents, there is really no such a thing as an external institution (or person) that is there in order to really look out for us, I believe we all agree in that we need to build our own safe haven ourselves, a bullet proof stronghold if you wish.
But don't let rosy circumstances blind you from perils up ahead, if your wealth growth is being eaten by taxes, inflation and all kinds of "growth repressing" factors, and what you have is sitting there at the mercy of any claim, caprice or calamity then you really don't have that stronghold in place.
But don't let rosy circumstances blind you from perils up ahead, if your wealth growth is being eaten by taxes, inflation and all kinds of "growth repressing" factors, and what you have is sitting there at the mercy of any claim, caprice or calamity then you really don't have that stronghold in place.
Trusts just like dogs, are always there for you, they keep your wealth from arms way and allow you to rebuild a life not to mention retire in all tranquility (and unlike dogs they actually outlive you giving the chance to your designated heirs to decide how to proceed while also avoiding probation and death taxes).
They are NOT for the super rich only, they are quite cheap and easy to set up nowadays and they serve you as a central base wherever you are in the world, getting rid of hurdles, threats and making sure that what`s yours stays yours.
In the next post I will delve in the technical details about what a trust really is, all the benefits and how easy it really is to get your very own.
Thursday, March 26, 2015
3: I used to have...
"...But Things May Change" sung Bob Dylan in one of his songs...
Ahh...bank and credit cards, what a nice thing, if a burglar waltz into your house he won`t find all your belongings and if they stole your wallet/card holder, you can still block the card with a phonecall.
But there are different breeds of burglars these days, they can access anything you have and they might be in your future while you are peacefully sitting there completely unaware...
But let's roll back for a second and let me tell you as story...
I was watching a TV program on Italy's RAI 3 channel years ago, they were showing an RVM shot in Milan, where a line of people was waiting to get a hot meal and a bag containing some food items (a pack of Spaghetti, a brick of milk etc.) I thought to myself "finally they are addressing the problem of homeless people" but there was a catch... Many people in line weren't homeless at all, and one that was, it was for a very particular reason...
The first group while all ex company workers owning a small apartment in Milan's suburbs, made the mistake on counting on the famous 1+ million lire pension, little did they know that the Lira would turn into Euro and that with the Euro equivalent they could hardly make ends meet.
But the one that sparked my interest even more however was this guy the reporter interviewed, he told his story (with mosaic effect on his face and garbled voice to protect privacy) of when he spent glamorous days in the 80s doing "Aperitivo" dressed in the latest fashion,
...when all of a sudden his wife divorced him, took the kids, took the house, obtained from the judge ailments for a quite unreasonable monthly sum, and his small business, slowly but surely went down the drain.
So let`s repeat a part of Robert Kiosaki adage here: ""It’s not how much money you make, but how much money you keep, ".
You never know when a law suit may strike you, people nowadays sue for the smallest of reasons, it could be your ex wife, your neighbors, the person leaving below you, hit on the head by a vase or your loosely tighten satellite antenna (an ex employee, a woman you met at a club, the tax office, the list goes on and on, Ellen Pao might cost her company USD 160.000.000 just as an example).
They are gonna aim straight at your jugular and try to get ahold of as much as they can. If they win the law suit the Judge might seize your belongings and leave you with a portion that will be the smaller the larger the claim will be.
So, getting back to the analogy of the plastic bag containing water (where water=money or properties) wouldn't it be good every once in a while to put the water accumulated so far into an indestructible steel barrel?
As to say, "this is what I made up until now, I mark the spot and safe guard it so that at least this part will stay with me no matter what happens in the future".
Would you put all your cash in a wheeled shopping cart and go around town to the happiness of every robber around you? Of course you wouldn't.
Yet if a lawsuit strikes, all your belonging are probably sitting there in the open, ready to be claimed by any judge (to the happiness of ex-wives, neighbors and more).
What if I told you, you could actually obtain both tax deferring capabilities and bulletproofing of your belonging using the very same instrument?
I'll tell you all about it in the next post...
Ahh...bank and credit cards, what a nice thing, if a burglar waltz into your house he won`t find all your belongings and if they stole your wallet/card holder, you can still block the card with a phonecall.
But there are different breeds of burglars these days, they can access anything you have and they might be in your future while you are peacefully sitting there completely unaware...
But let's roll back for a second and let me tell you as story...
I was watching a TV program on Italy's RAI 3 channel years ago, they were showing an RVM shot in Milan, where a line of people was waiting to get a hot meal and a bag containing some food items (a pack of Spaghetti, a brick of milk etc.) I thought to myself "finally they are addressing the problem of homeless people" but there was a catch... Many people in line weren't homeless at all, and one that was, it was for a very particular reason...
Italy: people lining up outside a Caritas Facility
The first group while all ex company workers owning a small apartment in Milan's suburbs, made the mistake on counting on the famous 1+ million lire pension, little did they know that the Lira would turn into Euro and that with the Euro equivalent they could hardly make ends meet.
But the one that sparked my interest even more however was this guy the reporter interviewed, he told his story (with mosaic effect on his face and garbled voice to protect privacy) of when he spent glamorous days in the 80s doing "Aperitivo" dressed in the latest fashion,
From Navigli...to Back alley...
...when all of a sudden his wife divorced him, took the kids, took the house, obtained from the judge ailments for a quite unreasonable monthly sum, and his small business, slowly but surely went down the drain.
So let`s repeat a part of Robert Kiosaki adage here: ""It’s not how much money you make, but how much money you keep, ".
You never know when a law suit may strike you, people nowadays sue for the smallest of reasons, it could be your ex wife, your neighbors, the person leaving below you, hit on the head by a vase or your loosely tighten satellite antenna (an ex employee, a woman you met at a club, the tax office, the list goes on and on, Ellen Pao might cost her company USD 160.000.000 just as an example).
They are gonna aim straight at your jugular and try to get ahold of as much as they can. If they win the law suit the Judge might seize your belongings and leave you with a portion that will be the smaller the larger the claim will be.
As to say, "this is what I made up until now, I mark the spot and safe guard it so that at least this part will stay with me no matter what happens in the future".
Would you put all your cash in a wheeled shopping cart and go around town to the happiness of every robber around you? Of course you wouldn't.
Yet if a lawsuit strikes, all your belonging are probably sitting there in the open, ready to be claimed by any judge (to the happiness of ex-wives, neighbors and more).
What if I told you, you could actually obtain both tax deferring capabilities and bulletproofing of your belonging using the very same instrument?
I'll tell you all about it in the next post...
Wednesday, March 25, 2015
Reason 2: Unrealized Gains...worth more than you think...
Continuing from the last post, and with the analogy of accumulating wealth as in trying to fill a leaking plastic bag with water (where water=money) here is reason 2 (this one`s a biggie):
Bob and Mary are married, they work all day and have some sort of financial planning in place, with their savings growing slowly but surely.
At the end of the journey, when they finally retire, they immediately notice that what they saved has lost purchasing power (see previous post) but they are still satisfied, in the end they have a roof above their heads and enough money to pay for regular expenses.
I can already see them sitting on the couch in front of a fireplace...
...saying things like "we are lucky, there is people on the streets you know... yeah our neighbors are going on a cruise voyage around the world next week, but they are rich, we did what we could..."
And indeed they did what they could.... in term of working that is, but...can they say the same thing about financial planning?
Here is the scary thought: what if the right financial planning would have allowed them to join their neighbors on the trip?
What if, while they were working hard, their money was slacking and spilling, robbing them of those comforts all the more appreciated, when energy is no longer the same?
Let`s make an example on $100.000, Bob and Mary paid every year 23% of capital gain tax already "built in" their performance (banks do this automatically), if their performance was 9% a year how much would have they lost? Around 2 % a year? And what about the interests that 2% that disappeared would have gained if it stayed in? and what would the percentage be on that 2%, 6% or 9%?
You guessed it, they could have got 9%, and next year 9% on that previous 9% and so on in an exponential crescendo.
To give you an idea of the power of compounding (see also Einstein`s quote 3 posts back)
If while breaking their backs at work their money were instead working as hard for them, with no leaks and maximum efficiency, not only Bob's and Maria's fireplace could look better...
...but the chairs would probably be empty as they would have joined the neighbors by now...
No matter how much you have or add to the pot every year, I can assure you there is always a way to add additional income and move one step up the goals and achievable dreams you can aim in your future.
If you don't want to envy that ever-smiling rich couple and want to "be" that smiling couple yourself, stop the leakage now, pocket everything and feed it to the compound interest machine, your are still in time, but don`t postpone, the more you wait the more water spills out.
Bob and Mary are married, they work all day and have some sort of financial planning in place, with their savings growing slowly but surely.
At the end of the journey, when they finally retire, they immediately notice that what they saved has lost purchasing power (see previous post) but they are still satisfied, in the end they have a roof above their heads and enough money to pay for regular expenses.
I can already see them sitting on the couch in front of a fireplace...
...saying things like "we are lucky, there is people on the streets you know... yeah our neighbors are going on a cruise voyage around the world next week, but they are rich, we did what we could..."
And indeed they did what they could.... in term of working that is, but...can they say the same thing about financial planning?
Here is the scary thought: what if the right financial planning would have allowed them to join their neighbors on the trip?
What if, while they were working hard, their money was slacking and spilling, robbing them of those comforts all the more appreciated, when energy is no longer the same?
Let`s make an example on $100.000, Bob and Mary paid every year 23% of capital gain tax already "built in" their performance (banks do this automatically), if their performance was 9% a year how much would have they lost? Around 2 % a year? And what about the interests that 2% that disappeared would have gained if it stayed in? and what would the percentage be on that 2%, 6% or 9%?
You guessed it, they could have got 9%, and next year 9% on that previous 9% and so on in an exponential crescendo.
To give you an idea of the power of compounding (see also Einstein`s quote 3 posts back)
- $100.000 for 30 years at 9% per annum using simple (not compounded) intrest: $370,000.
- $100.000 for 30 years at 9% per annum using compounded intrest: $1,326,767.85
If while breaking their backs at work their money were instead working as hard for them, with no leaks and maximum efficiency, not only Bob's and Maria's fireplace could look better...
...but the chairs would probably be empty as they would have joined the neighbors by now...
No matter how much you have or add to the pot every year, I can assure you there is always a way to add additional income and move one step up the goals and achievable dreams you can aim in your future.
If you don't want to envy that ever-smiling rich couple and want to "be" that smiling couple yourself, stop the leakage now, pocket everything and feed it to the compound interest machine, your are still in time, but don`t postpone, the more you wait the more water spills out.
Tuesday, March 24, 2015
The 3 Reasons that hinder your wealth growth.
Years ago, famous Investor and best selling author Robert Kyosaki (his "Poor Dad - Rich Dad" series of books comes to mind) wrote:
"It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for".
Let's compare your wealth to a plastic bag you are tryng to fill up with water (where water=Money).
You might not have noticed but the plastic bag you are carrying has an unnoticed hole at its bottom leaking water as you walk. Yeah this year the bag is slightly fuller, but that is just because you poured in more water than it leaked out and, after you did, the leaking is still happening. Eventually your capacity of pouring water might diminish but that hole will grow in size.
What am I talking about in real terms?
3 things basically:
- Erosion of your future wealth by inflation.
- Erosion of your future wealth by unrealized gains.
- Erosion of your wealth by unforeseen "unfriendly events".
Inflation.
Let`s say you have $100.000 and you want to buy a new car, say for $27.000.
You are now left with $73.000 in the bank as you drive through town in your brand new moving machine, feeling a little impoverished but at the same time mighty satisfied.
You check what you can buy with the remaining $73.000, but decide to keep the money in the bank.
The next day you go out and the car is not there...ever had that sinking feeling when you open the front door in the morning and wonder where you left it? Did you leave it on the road, park it in the garage... or has somebody stolen it? As it happened to a family in the USA, theirs was swallowed by a 30ft sinkhole which opened just below it in their driveway!
real pic of the hole
I'm pretty sure that if that happened to you, you would get pretty mad wouldn't you? And the reason is, such an event would be so evident and in your face that an immediate reaction is granted.
But let`s just say you don`t touch the money and keep it in the bank for 10 years, you go check your balance and it still says 100.000 (assuming your bank didn`t detract expenses) but when you see the actual purchasing power, you can buy exactly what you could by 10 years earlier with the remaining $73.000! As a matter of fact with inflation set at 3% in 10 years you lose exactly $27.000 of purchasing power due the ill effects to negative compounding.
Yup, your car just fell in the hole and you didn`t even notice...
"But I heard the problem now is deflation not inflation!", problem is, the inflation rates you hear on the news are grossly misguided, as what you see there is a piloted weighted index inside which enters only what "somebody decides" and where all elements do not have the same weight in the average. As you might have noticed yourself, prices are indeed increasing and you can buy less with your money today, compared to a year ago.
But let`s just say that this is really just the tip of the iceberg...
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