The Joneses Are Financially Irresponsible

The rich do have a few secrets... The Joneses are financially irresponsible... Think about the long run... Why you need money in the markets... Obsess about risk... Sign up for Doc Eifrig's critical retirement update... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The rich do have a few secrets... The Joneses are financially irresponsible... Think about the long run... Why you need money in the markets... Obsess about risk... [Sign up for Doc Eifrig's critical retirement update](... --------------------------------------------------------------- Editor's note: I (Corey McLaughlin) am on the road this week, but the Digest will roll on with a few guest contributions over the next three days. We're starting today with a classic essay from our colleague and Stansberry Research partner Dr. David "Doc" Eifrig... Originally published as part of Doc's Retirement Millionaire newsletter back in 2016, the following essay shares the "secrets" of the rich... Specifically, Doc explains what they know and what they do that allows them to live comfortably, including how "keeping up with the Joneses" isn't all it's cracked up to be. --------------------------------------------------------------- Many Americans – average folks working to build a comfortable life – assume the 'rich' have a secret... It seems they know something about "how the world works" that the rest of us don't. If these regular folks could just figure it out, they'd be wealthy, too. They'd live with less stress, more time, and more money. And money, after all, gives you the freedom to do what you want. It turns out, the wealthy do harbor a secret – three of them, in fact. And today, I'm going to share them with you... These secrets (or "tenets") not only build wealth... they allow you to use it to live the life that you want to live. So if you're not happy with your current finances, then it should be obvious that what you've done so far hasn't worked. Your approach needs to change at a deeper level. If you'd like to understand how to truly build wealth, and use it to live freely, here's how you need to think... The first tenet is to curb your spending and save religiously... Outside of a few things, spending rarely brings joy. Identify the things you truly enjoy spending money on and forget the rest. Humans are notoriously terrible at predicting what will make them happy. "We expect the next car, the next house, or the next promotion to make us happy even though the last ones didn't and even though others keep telling us that the next ones won't," Harvard psychologist Dan Gilbert explains in his book Stumbling on Happiness. We get a nice warm feeling when we buy a new television or pair of shoes. So we tend to search that feeling out. Retailers and advertisers have become adept at targeting it. But it's short-lived. The thrill of these things wears off quickly. The possessions don't change our lives in any way. By contrast, saving money and using it to increase your personal financial freedom does make lasting improvements to your well-being and quality of life. Money saved generates future income. Income is what sets you free. And freedom is what truly makes us happy. But many people do the exact opposite of saving. They don't just spend money they have... They spend money they don't have in pursuit of some unachievable happiness. Folks in America like to 'keep up with the Joneses'... The problem is, the Joneses are financially irresponsible. They've got too much house, they've leased luxury cars, and they have credit-card debt. If you try to keep up, you'll get dragged down as well. According to the annual report from the Federal Reserve on the economic well-being of households, released last month, almost four in 10 Americans would struggle to come up with $400 in cash to fund an emergency. When you see someone who seems to live too well for the job he has, he doesn't have a secret skill. He often has a secret pile of debt. But you don't have to become a monk. One benefit of wealth is having money to spend on a few things that bring you joy. For me, I don't hold back when spending on books or travel. It's different for each person. Once again, a good rule of thumb is to choose one or two things you truly enjoy spending money on. Then cut back to just the basics on everything else. For example, I still drive the same 15-year-old Hyundai. It serves me well and I don't have to make payments on it. Instead of laying out money for a new BMW that won't make me happier, I can spend the money that would have gone to a car payment to treat myself to a couple of really nice dinners each month. When you learn to stop buying things that don't make you happy, you'll have the freedom to enjoy the things that do... like time or relaxation. All you need to do is give up the things that don't make you happy in the first place. I think everyone should start by socking away at least 10% of your annual income. Try to bump that up to 15% as you get comfortable with your new spending habits. The key to saving isn't about raising your income. It's not about saving a penny here and a penny there. It's about understanding yourself better and shaking all the frivolous desires from your mind. Being a diligent and disciplined saver is a critical first step... But that alone isn't enough to put you on the path to wealth. You must also follow the second tenet – learn to be an investor for the long term... Think about this... Imagine you work hard and aggressively set aside 20% of your earnings in cash for 30 years. After that Herculean effort, you've saved up... six years of income. Not too impressive. Twenty percent is a high savings rate. But it won't do squat to set you up for retirement if it sits in cash. If you don't invest the money, it's barely worth saving at all... Why do you need to invest? Because real freedom comes from income. And income comes from invested savings. "Investing" takes a lot of forms. Newsletter readers immediately associate the term with buying and selling stocks. And that is one common and effective form of investing. But the term applies to any activity that uses capital to create more capital... If you own a small business, you can invest in advertising. Investing in education can build your skills and boost your income. Even investing time in learning on your own can help you get ahead. Your car or a good set of boots aren't investments, though people like to use the term. Owning a home is an investment, but a particularly illiquid one. But for many folks, the primary means of investment is through public markets – stocks and stock funds. Lots of people let a variety of hurdles prevent them from being successful investors: the jargon, the account types, the fees, and the number of stocks and funds to choose from... It's easy to put off getting your finances in order until next year. Whereas starting to save is often a problem of priorities, learning to invest is a problem of inaction. You need to overcome that fear and inertia and get invested today. The good news is, the simplest and most straightforward investing plans are ideal for beginners – especially when adjusted for fees and risk. Even if you lack a passion for learning about investing, you can still devise a simple plan out of three principles... Invest in index funds: There are two types of funds. Actively managed funds have a portfolio manager who tries to find the best investments and beat the market. Index funds simply track the market. Hiring high-priced experts may sound like a good idea. But it turns out, active managers are terrible. A few years ago, a study by Morningstar found that only one in five large-cap funds beat the market over the previous 10 years. Dozens of other studies have shown the same. You don't need funds with active – and expensive – management. Index funds perform better and cost less. Avoid fees and taxes: One of the reasons index funds work better for individual investors than actively managed funds is the fees involved. Fees and taxes only take a little bit of your money at a time, but add up to tens or hundreds of thousands of dollars over the years. Investment funds charge annual management fees. For expensive funds, this can be around 2% of the account value. But index funds can charge as little as 0.16%. Use cheap index funds and tax-advantaged accounts like 401(k)s and IRAs when you can. Make consistent investments at regular intervals: We've all heard to "buy low, sell high." But how do you know what's low or high? Investors have a million ways of trying to answer that question. But one simple way to take the calculations out is to invest a consistent bit of money at regular intervals, like once a month or quarter. As a result, you'll necessarily buy more shares of a stock when markets are cheaper and fewer shares when markets are more expensive. Taking the calculations out by keeping your investments consistent lets the costs average out, which practically forces buy-low-sell-high success. The entire concept of building wealth and freedom requires that you earn a return on your savings. Outside of a lottery prize or other financial windfall, a working individual can't merely save enough to become free. And if your spending comes out of your savings, you'll never enjoy it. It's only when you hit the crossover point when the income you generate can cover your spending that you can truly enjoy the freedom that wealth can bring. But folks who invest too aggressively run the risk of undoing all their good work. That's why you must follow the third tenet – obsess about risk... Many people who get started investing focus on the possibility of big returns. They're drawn to the chance (however remote) of doubling or tripling their money in a short amount of time. I could rattle off dozens of investments with the potential for a high return right now. Some readers would gobble them up. But most successful investors pay far more attention to the other half of the risk-reward ratio... Return means nothing without considering risk. It can take a lot of effort to save up $2,000 or $5,000. When you take big risks, you can wipe it all out in a flash. Risks lead to losses. Losses lead you to question the wisdom of saving and investing. You need to avoid risk by investing in high-quality stocks. But more important are the concepts of diversification and asset allocation... Here's why... You should never put more than 4% to 5% of your portfolio into a single stock. When you invest in a basket of stocks with big upside, only a few need to go right to boost your returns. Likewise, if one stock falls quickly, your losses will be smaller. (Positions in funds can be larger because each share represents partial ownership of multiple stocks. It's another good reason to own index funds. They provide automatic diversification.) As the stocks you invest in get riskier and more expensive, you should put a smaller percentage of your capital into them. Having a diversified portfolio means you're not going to double it in one year – but it means it won't likely get cut in half, either. You also need to diversify across asset classes. Stocks, bonds, real estate, gold, and other investments move in different directions and are influenced by different economic factors. By holding multiple asset classes, you reduce your risk and increase the return you get per "unit" of risk you take on. When you obsess about your risk, and not your return, you end up with a strategy that works over the long haul. Now, it's important to find the perfect harmony here... Why don't most folks get rich? Because they don't follow all three of these tenets at once. As we pointed out, savings without investment don't grow – and worse, they'll get eaten away by inflation. However, if you try to invest but save only a little, your balance will look too puny to keep you excited about it. And if you still love to spend, you'll soon find yourself tapping into your brokerage account. Finally, losing money will obviously wipe out your savings. But it may also discourage you from investing. Only by following all three of these tenets can you successfully set yourself free from living paycheck to paycheck. --------------------------------------------------------------- Editor's note: Speaking of secrets, only a few readers might remember... but starting about 10 years ago, we detailed what might be the No. 1 investing secret of all time. It was such a big story that Wall Street successfully lobbied for a ban on talking about it... Now, there's a big update to this story, and Doc has all the details... This Thursday, Doc – a former Wall Street trader before he went to medical school, and before he joined Stansberry Research and started sharing financial and medical wisdom – is planning to share all the information in a brand-new free video event. He will explain why he has been waiting more than 10 years for this moment. Doc will also go over his latest market outlook, share his top investment ideas right now for building long-term wealth, show how to use high inflation and interest rates to your advantage, and much more... Doc will even reveal how he invests 70% of his own money. This event is totally free. We just ask that you sign up for it in advance so you don't miss anything. [You can do that right here](. --------------------------------------------------------------- Recommended Links: [A 14% Cash Yield Today, 29% on the Horizon]( It's a golden age for income investors. The very same forces (like inflation and high interest rates) that are making MOST of the market a painful disaster... are serving up the juiciest income yields in many, many years – in quality, low-risk stocks. Dr. David Eifrig is laying out an easy-to-follow plan (in full!) that could pay for all your retirement expenses. Plus, he's giving away a FREE, live recommendation... and a lot more. [Click here for full details](. --------------------------------------------------------------- [Until Midnight TONIGHT: The Most Important Stock Warning of 2023]( A powerful indicator just triggered that has only appeared a handful of times since 1950 – and every time, it has predicted the stock market's next move with a 100% success rate. One Wall Street insider sounded the alarm... and explained why ignoring this signal could spell disaster for your money in 2023. Until midnight tonight, [click here for details (includes a free recommendation)](. --------------------------------------------------------------- New 52-week highs (as of 4/6/23): CBOE Global Markets (CBOE), Hershey (HSY), McDonald's (MCD), Flutter Entertainment (PDYPY), and Unilever (UL). In today's mailbag, feedback on [Dan Ferris' latest essay from Thursday](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Another great article, Dan!!!!! Your description of Mr. Market is right on! Although I think, besides being manic depressive, he occasionally suffers from schizophrenia and at times he is downright psychotic!" – Paid-up subscriber Larry N. Thank you Dan. I enjoy your communication style. I find that it seeks to keep things as simple as possible and amusing, but also very commonsensical. It also keeps me grounded and continues to reinforce my own thoughts on what is happening right now. "At some point here, bloated valuations and falling earnings expectations have to reconcile. And when they do we need to be ready." – Paid-up subscriber Brett M. "Dan, so well written and so very true. Thanks for being one of Stansberry's best." – Stansberry Alliance member Jeff S. Dan, Thank you! Your description of Mr. Market is priceless." – Paid-up subscriber Tim P. Here's to our health, wealth, and a great retirement, Dr. David Eifrig Chicago, Illinois April 10, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,054.3% Retirement Millionaire Doc MSFT Microsoft 02/10/12 907.9% Stansberry's Investment Advisory Porter ADP Automatic Data 10/09/08 777.5% Extreme Value Ferris ETH/USD Ethereum 02/21/20 646.1% Stansberry Innovations Report Wade HSY Hershey 12/07/07 626.8% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 556.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 454.1% Retirement Millionaire Doc AFG American Financial 10/12/12 412.0% Stansberry's Investment Advisory Porter ALS-T Altius Minerals 02/16/09 330.7% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 317.7% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,450.8% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,174.3% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,052.8% Crypto Capital Wade MATIC/USD Polygon 02/25/21 921.3% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 643.3% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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