by Ann Wilson
It’s not the pot, it’s the ingredients that stink!
“I don’t want to invest in the stock market. I’ve got an ISA/ Pension/ Superannuation/ Retirement Annuity/ 401K and it is doing terribly”.
I get emails like this almost everyday and it makes me mad. Not at the emails but at the misunderstanding of tax deferred or tax free investment vehicles and what’s in them.
You see it’s not the pot - (read ISA/ RA/ 401k/ superannuation/ pension) - that’s the problem, it’s what you’ve got in it.
It’s Just A Pot
The horde is coming over to play and you need to feed them. What better than a tasty lasagna, you can cook it in advance, it freezes well, goes far, it’s tasty and everyone loves a good lasagna - right?
For that you need a seriously good slow-cooked Bolognese sauce, full of flavor. So what do you do?
Take out your trusty heavy based pot and throw in a store bought packet of ready made bolognese - one of those dehydrated ones where you just add water - stir this up for 5 minutes and voila - it’s done?
Take out your trusty heavy based pot and add your quality ingredients one by one. Sauteing your onions until they are golden, adding your meats and browning them gently to release their flavor, pouring in your chopped tomatoes and quality paste, adding a grating of nutmeg, seasoning and a bay leaf and finally filling it up with a hearty robust red wine before putting it gently into the oven to slowly cook for a few hours brining out the flavors until your whole home is filled with mouth watering scents?
When you taste the first option- and have to run to the sink to spit it out very quickly - do you blame the pot? Of course not!
So why do we do exactly this with our investments?
Understand this - your ISA/ Pension/ RA/ 401k/ Superannuation or whatever tax efficient investment wrapper you use is just the pot.
So many people think their pot is the investment. NO - it is just the pot in which you put the investments to benefit from tax deductions and savings.
If your pot is producing S#*t then you need to look at what’s in your pot, not blame the pot.
What’s In Your Pot
You want it all! The zesty palette tingling starter, a sumptuous rich main, the crisp salad, a selection of the finest cheeses, and a decadent desert to die for - all accompanied by the finest champagne and wines to complement each course. Cool.
You get all of the above, and throw them into a blender, whiz them together and savor the brown sludge you’ve just created!! Oh dear - here comes the dash to the sink again.
Yet again this is what so many people do with their investments.
You must know what is in your pot and what is meant to be in your pot.
Many people get talked into buying these hideous “everything in one” investment products. These are the investing equivalent of the brown sludge!
You must keep your investments separate from your insurances or suffer the consequences. An investment is an investment and insurance is insurance. They do not mix well and if you buy an “investment” product pretending to be all things, an investment with any sort of insurance be it, life, critical illness, disability and so forth, then know you have just put brown sludge in your pot, making who ever sold you the product rich and you poor.
Keep It Clean
If you are offered tax deferred or tax free mechanisms within which to invest, use them for exactly that - invest. There is no point using up your allowances on things that wouldn’t attract tax anyway, like cash holdings (if it doesn’t grow or pay an income you can’t get taxed on it) or insurances.
Select investments within your pot that have the lowest cost (you get to keep more of the money) and have the greatest growth potential thereby maximizing the tax benefit.
In almost every country you can choose what goes into your tax efficient pot. You do not have to buy ready made “TV dinner” type investment products - never a good choice. Instead, select clean, simple, low cost investments such as a selection of low cost Index Tracker Funds or ETF’s (Exchange Traded Funds) which you buy regularly through an automatic investment plan and reinvest your investment return. Leave these to bubble away in your wealth oven and grow into a sumptuous tasty treat for you and those you love to feast on in time to come. You will discover what to put into your pot in 7 Weeks to Financial Freedom.
What is in your wealth pot?
Do you need to re-look at your ingredients and throw out some of the stinky bits?
I’d love to hear your comments!