This week’s Smart Money podcast is about red money and green money and how you should diversify your financial portfolio to prepare for retirement.
Here’s a question, how much of your money is currently in the market? All of it? 50%? 80%? Did you make a conscious decision to have that particular percentage exposed to market risk? Or did it sort of just happen? Why would I be asking this? Now, as I’ve said before, the markets go up, and the markets go down. So how much of your life savings, that is exposed to market risk, is a very important consideration. That’s why I strongly encourage everyone to think of their money in terms of red money, and green money.
Now, those terms might sound a little childish or funny, but I believe they help us understand a very important concept. So let’s explain this. Red money is money that we’re willing to expose to market risk, we’re willing to do this in hopes of a higher return. We accept the possibility of losses, even significant losses, in hopes of greater gains. Red money is exposed to upside, and downside market risk. Now green money is about safety and security. With green money, we’re not willing to accept the risk of losses. So, we’re willing to accept a lower return in exchange. Green money does not have downside market risk. So if red money is exposed to upside, and downside, and green money has only upside, which one is better? Well, that’s probably the wrong question to be asking because neither one is inherently good, or bad. It all depends.
The very important questions we should be asking ourselves are these: What percentage of my money should be in red money? And what percentage of my money should be in green money? Now, if you’re at or near retirement, you should ask yourself if any of your money should be in red money? Can you afford to lose any of your retirement funds? Would you rather take two steps forward, and three steps back? Or just take one step at a time, and never take a step back? If you’d like to learn how to step forward and never backward, call for my free, Baby Boomer Retirement Boot Camp book, and my free RetireSHIELD® kit. Both of these could change your financial life for the better.
The guy that sits down at the blackjack table and freaks out when he loses, should not have been betting with that much money. The guy that sits down at the blackjack table, and loses, and gets up, and has a great evening for the rest of the night, you know it didn’t matter to him that he lost the money. So if you’re at all concerned when the market drops, shouldn’t be in red money. You don’t go to Vegas and put $500,000 on red. You just don’t do that. So it makes it easy to decide, you have to ask yourself this question. If I were to lose some, most, or all of my money in my accounts, would I be upset? If the answer is yes, then your money should be in green money.
Let me tell you what red money is good for… the young and the rich. Now, the young have time on their side, they can afford to lose money in the hopes that they’ll make it back in the future. The rich can afford to lose a little bit of their money and still live comfortably. But I’ll tell you, even our clients that have means, the folks $5 million, $6 million, they don’t want to lose it either. Because the reality is, if you’re at or near retirement, you should definitely be in the green, you don’t have a lot of time to make it back. Green money is money that cannot be lost due to market declines.
Many people, economists, well-known advisors believe that all retirement money should be green money. Personally, I think that makes a lot of sense. Many people I work with, regardless of age, want 100% green money because they know they can have upside market growth without accepting any downside losses. And they understand math. They’ve looked at it. If you go forwards and never backwards, you’re gonna go farther, quicker, than if you get a huge gain and then take half of that away. Isn’t it time for you to go green with your retirement?
Not only can you have some upside growth without any downside market risk, but you can get a first year bonus of 10% on your entire deposit, all your money, just for opening the account. You can also lock in guaranteed growth of up to 7% on the lifetime income account. How about that? No downside market risk, a bonus, and guaranteed growth on the lifetime income account of up to 7%. Contact us today and I’ll arrange to show you how it works.