Notes from Free Financial Seminar
(Comments: The importance of financial planning out-weights any current 1st priority tasks – the effect of not getting it right can easily cost thousands to ten’s or hundreds of thousands of dollars. So – think about it now!
-Weilan Wu)
Keys in Long-Term financial investment:
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Diversify.
Key points: 1 investment of 6% vs:
5 investments of 15, 10, 5, 0% or loss,
For same amount the latter wins way way more.
(even in the case of 3 losses, if the other two investments are properly selected, still out-wins the single investment approach).
To realize this, best action is to buy mutual funds.
(there are over 18000 mutual funds in US. Follow a couple simple criteria, can almost guarantee no loss of money in long-term).
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Dollar
Cost Averaging
Key point: Buy the same amount, every month, vs one-time investment.
For the same amount the former wins way more, especially in the down-turn markets.
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Time
Effect
Key point: Use time to reduce the investment risks.
For S&P 500, the risk of losing money:
1 year – 28%
5 years – 10%
10 years – 3%
15 years – 0%
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Asset
Allocation
Another form of diversification, spread the asset into different investment vehicles: Stocks, bonds, real estate, etc….
Key point: Re-balancing after certain period, this is the so-called ‘morning star’ mutual fund investment method (note: from WW).
The benefit of re-balancing is to realize the ‘buy-low’, ‘sell-high’ investment principle.
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Tax
consideration
VUL:
Tax-free to withdraw. (only other one: Roth-IRA).
It’s life insurance + investment method.
(also good for children’s education).
How much – common estimate $500K.
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Others
o Putting money in bank is losing money, longer you put – the more you lose.
o It may not be a good idea to pay off the house too soon (15 years vs 30 years mortgage). Use the money to invest wisely, help you build up more wealth.
o In US, it not only about how to make money, but also, how to manage money (and in some case), how to hide (shield) your money.
o More – to study together.. more you sophiscated, more money you make and save grow..
