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How to Retire Early: The Latte Factor

Lesson 13 of 18

Investment Pyramid

 

How to Retire Early: The Latte Factor

Lesson 13 of 18

Investment Pyramid

 

Lesson Info

Investment Pyramid

we're going old school kids. We're going. We're going old school. So this is what you know, new school looks like, but we're gonna go old school, like so new school. I would do everything on the screen, but I want to go old school. Because back in the day, when I taught a class in an actual classroom with a blackboard before this was so high tech and I would teach classes and have 10 15 20 people in the room and teach it for 10 hours, I'd have a blackboard, and I would teach the investment pyramid. Actually, in some cases, just for two hours, entire class would be dedicated. The mess impairment. Because there's so much I can teach on an investment pyramid. We're not gonna do this over two hours, but I want you to draw pyramid right now. And there's gonna be 123456789 10 cat, 10 spaces. Okay. And I'm gonna walk you all the way from the bottom of the pyramid to the top. And here's what you should deal. This is what you want to know about this pyramid. At the bottom is low risk. and up he...

re, cross it. I will say this is high risk. So we're going from low risk toe high risk. And once you guys have got your pyramids filled out, you let me know. I'll wait till you're all looking up. Now I'm looking at you. You got your pyramid filled out. You gotta fill your pyramid out. All right, so on the bottom, the first thing you could put your money in his good old thing called cash cash is like a checking account. Right? So a checking account today, someone told me what a checking account today is paying 0.1%. Can we agree that that's basically zero. The average checking account American cost a little over $3 a year in miscellaneous bull fees. Now, here's what's amazing, because I love explaining it this way. Pick a bank pick any big you want. Give me a bank chase. You can go to chase and get 0% a checking account. But you know, it's interesting. Chase also has a higher paying account. It may be called online. I don't know. Chase in particular be any bank. It's gonna be called online savings account or to be called a money market account or it's gonna be called a high yield account. But those accounts and I'm gonna refer to these right now is money markets these accounts. But you're totally safe. And often even insured, are paying depending on the bank now up to 2%. Now there are banks that are starting to make this even higher, literally, like right now to 1/4 2.35%. There's actually a massive race for this money right now. So earlier I showed you Marcus, which is Goldman Sachs Online money market account. They're paying 2.25 two days ago. As with somebody who runs works, one largest financial service companies, they have a teaser rate right now 2. Some of these accounts come with checking. Is this more than this? Your emergency money should not be in a checking account, learning nothing. It needs to be up here, so it's earning at least 2 to 1/4. The next step up on this ladder are called CDs. Writing familiar with CDs is what the banks were always talking about CDs. Certificates of deposit sometimes referred to a certificates depreciation. If you put all your money, these are paying right now 2. two, I would say 3.5% depending on the length of time. Like if you go five years out right now, you can get about 3.5%. And again, all this is available online so you could go to a bank and you could be a zero. Go to chase and get zero Go chase. Be probably 2% here. I'm just using them generically, cause I don't know this for sure. Any bank here, girls will get a CD. Here's what's so interesting. You can also get a bond from that bank. So Bank of America or chase for Wells Fargo the issue bonds to go raise money bonds right now, and the government issues bonds, bonds, what's known as an IOU. You loan your money and bonds promise to pay you these things. This pays months late. It doesn't space. Monthly does little, huh? This is usually annual Bonds are usually twice a year. Bonds are paying right now. Between three to 6% Now. I could show you an entire pyramid just on bonds because I could take you from short term bonds. Long term bonds. I could take you from quality bonds rated bonds to be bonds to see bonds, toe high yield bonds. So that's how you get these different rates of return. It's also the length of time. The longer you go out on a bond like a 10 year bond, the heart rate of return will be. But again, there are banks right now that will pay 6% in the bomb and pay your zero present in cash. So if you're comfortable, bring your cash in a bank and they have a bond in five. They're the CD. Next is preferred stocks. Preferred stocks are paying. Now. I'm a huge fan of preferred stocks, and just like I have all this, like when you pulled a diversified purple, you end up having all of it preferred stocks. You go to a bank, you loan money. The bank bank says, We'll pay you back. We'll give you your money back in five years. We'll pay you twice a year. That's your dividend preferred stocks, typically their pig quarterly. They don't promise you your money back. It's secured after the bondholder gets paid back it's ahead of the stockholder. So, like, let me go back. Let me go back to McDonalds. My grandmother taught me how to buy stock in McDonald's, which is gonna be the first thing up here. This is stock. If McDonald's were to go out of business, the first person to not be paid back is the stockholder, because what would happen is the stock just dropped down to zero. Have they went bankrupt? This won't happen. McDonald's. But if they went bankrupt because big companies go bankrupt all the time, the first person after stockholder that gets paid back is the preferred shareholder after preferred shareholder. It's the bondholder, his following us. That's how the rate of the difference between low risk and high risk so stocks is what's called large company stocks. Anybody remember what I said? Large company stocks of average since 1926. There's 10% in the back of book. Since 1926 large company stocks have averaged 10%. Happens to be mediums would ever call. Medium size companies have arrived just a little bit more than that. Let's call it 11% roughly, and then we have small company stocks. These have averaged again. This is going back from and it's in the book bonds of average five. This camera with money markets. But let's call this, too. So, as I showed you earlier, like, if I can get if I could just get 10 here and five here and I've got a mixture, I get somewhere around seven. I'm gonna double my money every 10 years. Rule 72. The next level risk our options. Options allow you It's a derivative. Options allow you to take a position in a stock really, without owning it. You can take a position that allows us spying stock for the future, going higher, even take positions. The stock's going lower. Somebody put on Um oh, have you guys ever been on Quora Cores and online website to ask questions? You got asked about buying options yesterday on Cora. I see the average person has no no business buying options. You buy options and you can. You're getting an option, which is a right to buy a stock or sell a stock. But there is a limited time frame, and the option can expire worthless. So, like if you buy a 60 day option, whatever that stock price goes against you, you don't get your money back. If I buy McDonald's and McDonald's goes down, people are gonna keep eating cheeseburgers as long as I'm alive. Do we agree on this? Happens be That's been wide. McDonald's has been a phenomenal stock because Mr Investment Mistake I ever made was not just continue investment dollars the rest of my life after age seven, because I'd be so Richard would be just obnoxious. Don't BUY options. Most people have no business buying options, look super sexy and CNBC super risky. You don't need to go higher truthfully than this. You could never go higher than large company stocks. You can have a little bit in small company stocks, a little bit of median company stocks, but you don't really have to go higher than this. I have no money in small company stocks. I have a little bit of medium a lot in large. I got a whole bunch prefers a whole bunch of bonds. I am Bateman And then I got real estate, so I'm gonna go through now. What? I called the red zone. The red zone is where you lose all your money. The red zone is where a lot of people put all their money. One of the reasons people put their money in the red zone is that they're trying to get rich quick because they're behind. So things that tend to lose all your money and I'll just call them packaged products. We're going to so many people. They're gonna hate me for saying going through this, But typically, anything that's got the word limited partnership in it, it doesn't really matter what it's in. The common denominator among a limited partnership is that your investing is something that's been packaged up by somebody else. It's being sold to. You usually promises, Ah, high return. But the key thing is, and how you'll know if it's one of these things is not liquid. You can't turn around and sell it instantly. Every single thing here I went through from here to here could be sold, and you can have your cash back in three days. That's how long it takes to settle trades trade so you can buy a large company mutual fund and you could be out of it having cash back in three days, you could buy a medium size cut stock or mutual fund out of all of this. Everything here is liquid, even bonds you by 10 year bond, you could still sell the 10 year bond. You're gonna maybe solid a discount. You can buy CD, but you can get out of the CD. You'll have a penalty, but all of that's liquid. You always want liquidity. Soon as you bought, things are not liquid. The problem is there are other people that want to sell it, and they can't sell it either. And that's why the value becomes often worthless. Great example of package crap right now is what's called a non traded read. Billions and billions and billions of dollars package up his non traded real estate partnerships. Inevitably, they end up being laughing in the back of the room. Inevitably, these things end up being worthless. I know I worked, I first of all, I run I'm, a co founder of a firm with $7 billion under management. The Bok Group today has 1.1 billion. I spent my entire 26 years in this business 1st 9 years, going through statements working with real people when their statements come in and they've got something that's worth nothing. But there's a name by it every time. It's a limited partnership could be a limited partnership in oil. It could be a limited partnership. Real estate could be a limited partnership in solar or wind. It's a limited partnership. You don't belong, in my opinion, a limited partnerships. You don't belong in privately held companies where someone's trying to build a business. It's super sexy in this world of investing in startups. But if you're an average person like today, this is what's a scary which we've changed the regulatory rules. And today you can literally be on Facebook and you're gonna There are Facebook ads that will tell you that you could be in the next unicorn. You, too, could invest in next uber early. We're taking investors today with just $1000 but it's limited time only if you use Facebook ad for a limited time on Lee Investment. You're not seeing this money someday. Okay? Don't be investing in limited time investments on my face, but don't be investing in anything off of Facebook. Out. Love your Facebook, but don't don't buy things off of weather. That's all right. How many of you have heard a bickering? Okay, so it's not that I'm against Bitcoin, but I'm gonna I'm gonna lump Bitcoin into this category. How many of you have bought or sold anything with Brooklyn? Yep. Nobody. I have yet to be in a room. I've been Let's just happen in front of 10,000 people in the last 18 months. Mostly retirees. Could I get asked about Big Corn and every summer, imminent event and then, God help me, have you have bought anything or scolding one hand has gone up so far in two years. Why would you invest in something that no one uses? How many of you have invested in dollar bills? How many of you have dollar bills? You use dollar bills every day. Why don't you invest in dollar bills? Because nobody investing currencies, but in theory, Bitcoins a new type of currency and everybody wants to invest in this mythical thing that sits inside a cloud somewhere. I said two years ago, about 90% of I CEOs initial coin offerings would be worthless. $700 billion has evaporated, so far from crypto currencies. I don't know if Bitcoins someday gonna go higher again. I don't care. I don't care about the other 25, cryptocurrencies their out there right now there was a Cryptocurrency called Ripple. Everybody was buying it. Nobody's buying it now, So these are the ways you lose your money. Now the reason people are here, let's not kid ourselves. People are here because they want to get rich quick. Nobody's like. And then And what happens when people want to get rich quick is that as soon as it crashes and goes down to nothing, they say a minute for the long haul. They're not in it for the long. You can be in this stuff for the long haul. You can't be. You could be in this ever long haul to it's just never gonna come back goes wrong on you. Um, there's so many other things you could put put in this category like your friend starts a restaurant, and I'm gonna show this year to second the reason people fail when you're a friend, comes to you for money because the bank won't won't learn it to him. If you just say no. Okay. Don't ever look at your earlier Don't look at your money. Ever is play money. People rationalize putting money up here. Well, that's my play money. Really? Did you play for the money? No. You go out and kick a ball and then get paid now. So did you work for your money? Yeah. So don't put your work money into an investment that goes away cause it's called chain trading your life for money and losing it, which is called sad. So before I go to the four reasons people fail, let me see those questions here. What would you say would be a good strategy within, Like investing in the in the large company or medium or small? Should it just be more index funds? Should you try to find those things that you know you want to invest in because you believe in the company like McDonald's? I mean, you know, you really liked it and you knew that you were gonna keep eating there and probably other people would, so you didn't think you were gonna lose your money. So I think the average investor Havers person, you're better off in mutual funds. or index funds or E t. S. Because unless you're gonna really spend time researching and staying on top of it, it's a full time job, and it's more likely for so you won't be, is diversified an individual stock. If you put money into the S and P 500 you're gonna be a difference. Fighting to stocks. There are E T s. It can have 1000 stocks in 2000 stocks in it. Now it's not is sexy. In fact, it's kind of boring. But boring is pretty good. Points out pretty good points really good when it comes to investing. So I mean, look, I can tell you the bulk of all my investments and my client's money. Our clients money is in mutual funds to mutual funds. It's an index funds any ts. I own a handful of individual stocks, Um, but mostly I'm diversified, so I'm gonna show you a little bit like you could buy mutual fund that does all of this. In one fund, it's called target dated mutual Funds or these robo advisor accounts of the 1st 5 portfolios. It can all be done with one

Class Description

AFTER THIS CLASS YOU’LL BE ABLE TO:

  • Create financial freedom starting with as little as $5 a day
  • Learn how to earn 10% rates of return of your money
  • Understand the automatic millionaire habit that changes everything
  • Retire early or transition early to a life you dream of
  • Understand the FIRE movement and how to apply it to your financial future
  • Know how to become rich faster, as a freelancer or a small business owner
  • Use the Automatic Millionaire pyramid system to double your money in 10 years or less
  • Know which companies, apps and investments today are making managing your money easier and cheaper

ABOUT DAVID'S CLASS:

What if you didn’t need to be rich to live rich? What if there were a way you could achieve financial independence and live your dreams now?

In less than five hours – The Latte Factor Class can help you take control over your money and your life. Whether you’re just starting out in business, an employee, or you’re in debt and you just want to live the life you’ve always dreamed of, “The Latte Factor” is a one day program that has inspired millions.

David Bach is the Author of The Latte Factor and the creator of The Latte Factor Method. He’s also a nine-time New York Times bestselling author of books including Start Late, Finish Rich and The Automatic Millionaire. In How to Retire Early: The Latte Factor, David Bach will teach you why you are richer than you think. He’ll help you see a future that puts you in control over your finances and back in the driver's seat of your dreams.

It’s never too late to start living your dreams; today is your starting point. Whether you are living paycheck to paycheck, or simply want to increase your net worth, this class is for you if you’re ready for a fresh outlook on life and money.

WHO THIS CLASS IS FOR:

  • Anyone who wants to stop living paycheck to paycheck
  • Freelancers
  • Small business owners
  • People who want to live their dream life

ABOUT YOUR INSTRUCTOR:

David Bach is one of America’s favorite financial experts and bestselling financial authors of our time. He has taught millions to live and finish rich through his seminars, live events, courses and books. He’s the author of 9 New York Times best sellers, with over 7 million books in print in over 19 languages - including Smart Women Finish Rich, Smart Couples Finish Rich, and The Automatic Millionaire. He’s a media favorite having made thousands of appearances the past twenty years, including on Oprah six times and the Today Show over 100 times. David is the co-founder of AE Wealth Management and Director of Investor Education. His latest book is The Latte Factor: Why You Don’t Need To Be Rich To Live Rich. David presents seminars for and delivers keynote addresses to the world’s leading financial service firms, Fortune 500 companies, universities, and national conferences.

Lessons

  1. Class Introduction

    You don’t need to work five side hustles for the next decades to achieve early retirement. You don’t need to live paycheck to paycheck for the rest of your life. Meet David Bach and learn how small amounts of money can change your life. David shares his personal finance story starting from age 7.

  2. My Start in Investing and Teaching

    What did David’s first “financial advisor” teach him? Why is it so critical that women in particular begin their retirement planning now? David shares his investment history what you’ll learn in his book, The Latte Factor: Why You Don’t Need To Be Rich To Live Rich is about.

  3. Financial Education - Know Better To Do Better

    In this lesson, David paints a picture of the dire necessity of financial education for Americans. Learn about the mindset necessary for a happy retirement, how companies force employees out of work in their 50s, what rich people now that poor people don’t and how credit card companies prey on consumers. David lays out exactly what you will learn in this class.

  4. Start Early, Start Today

    Early retirees don’t all start with six or seven digit annual incomes -- most started saving and investing early. David shares a comparison of how early planning can immensely impact your retirement savings.

  5. The Latte Factor: How It Works

    What exactly is the latte factor and how can you find yours? In this class, David breaks down the latte factor math and shows you how to save money by cutting out small non essential living expenses and developing a daily mindset geared toward retirement. He also shares his pick of online resources and apps that aid in financial planning and investing.

  6. Student Success Story

    Hear directly from Elizabeth, a member of David’s inside team regarding her financial planning journey over the past 18 months.

  7. FITE - Financial Independence to Transition Early

    Learn about the FIRE movement and David’s take on transitioning vs retiring. David reviews how to plan backwards from your desired retirement age, introduces the 50/20 formula and shows the effect of turbocharging your income stream.

  8. Common Investment Mistakes

    Don’t make these common investment mistakes that won’t yield extra income. David gives advice on buying a car.

  9. Becoming Rich on an Ordinary Income

    You don’t need that much money to become rich or build up a nest egg. David shares research from Fidelity Investments that shows the concrete steps to take to become a millionaire through 401k investments.

  10. How Much do You Need to Retire

    How much should you save and invest or, as David says, pay yourself? See what you should be saving at 30, 35, 40, 45, etc.

  11. Retirement Plans & Where to start

    David orients you to the different types of retirement accounts available, highlighting their benefits depending on your needs. Learn the difference between a traditional vs. Roth IRA, spousal IRA, SEP IRA, 401k and solo 401k plan. What is recommended if you’re self-employed? What if you have employees? David answers your questions and points to brokerages, roboadvisors and apps where you can start.

  12. How to Earn 10%

    There’s a lot of talk about earning a 10% return on your investments -- how do you actually do it? David teaches you the rule of 72, a quick way to calculate how long it takes to double your money when calculations and retirement calculators aren’t at hand. David takes audience questions, addressing financial planning in relationships, investing while in debt, and his advice for self-employment.

  13. Investment Pyramid

    The opportunities for investment can seem overwhelming and intimidating; David presents an “investment pyramid”, displaying all investment options from low to high risk. Learn what makes a diversified portfolio and what David himself invests in. Lastly, David cautions against the high-risk investment zone and which investments to stay away from.

  14. Reasons Most Investments Fail

    In this lesson, David shares the top 4 reasons most investors fail; learn what not to do. See a historical representation of an investment from 1926 through today and learn why the stock market will always favor a “boring” investor.

  15. 5 Things to do During Market Correction

    Market corrections are normal and happen throughout history. David advises on what to do on your own or with your financial planner or advisor.

  16. Retirement Accounts and Investments

    What are target dated mutual funds, asset allocation funds, balanced funds and simplified ETF solutions? Why are they ideal investments? Which Vanguard fund does David recommend? David gives you homework in this class: crucial questions to ask yourself and actions regarding your 401k.

  17. Renting vs Home Ownership

    Why is real estate one of the best investments you can make in your future? David shares benefits and advice regarding mortgages, payment plans, bubble-proofing your real estate and how to become an automatic millionaire homeowner.

  18. Why Your Dreams Matter

    David closes, returning to the point of financial freedom: to live your dreams. He gives advice on different investments to consider depending on your time frame and how to plan a sabbatical. He ends the class with your final coursework: finding your latte factor and putting steps into place to start paying yourself first.

Reviews

Ling Fan
 

Great class! Concise and powerful! Wish I knew this 10 years ago.

Kennie Johnson
 

Very helpful and inspiring

Carlos Figueiredo
 

I thoroughly enjoyed the course love it!