“Any investment strategy that fails to recognize the insidious effect of taxes and inflation fails to recognize the true nature of the investment environment and thus is severely handicapped.” Sir John Templeton

“We just want something safe.  We don’t want to take any chances on losing our money.  We want something secure and guaranteed by the government.”  The couple I was meeting with in my office one afternoon was explaining their goals for retirement.  They were in their early sixties and had saved enough to supplement social security with a meager income.

I said, “Do you realize over the next 30 years of your retirement, with average levels of inflation, the cost of living will triple.  So what you are living on the first day of your retirement needs to triple as well just to stay even.”

“But we don’t want to take a chance on losing the money,” they pled.

“That’s the point,” I replied.  “You will lose money with your guaranteed investment.  You’ll program your portfolio to lose a little every year until you starve, run out or both.”

“We’re not with you.  We said we want government guaranteed investments that we can’t lose money on.”

“No the government guarantees the principle and interest not that you won’t lose money,” I said.

“Let’s think about it.  That kind of investment today pays say 2% interest.  Taxes will take 1/3 and inflation is running at nearly 2% annually right now and building.  So after taking that out you’ll be in the hole and that’s without withdrawing anything.”

“Oh.  We hadn’t thought of it that way.  What should we do?”

We discussed combinations of various investments that would give them some growth potential as well as a level of stability.  Then we set up a plan that took into account their real return to give them the best odds of living their retirement the way they hoped.  They implemented it but unfortunately panicked and blew it up a year later when the economy went south.  They opted for guaranteed consistency–losing a little each year.

I wish this was an isolated case but it’s not.  Too many people focus on avoiding the inevitable ups and downs of growth investments and program in a consistently losing portfolio.

Jesus told a parable about this when he spoke of a rich man who went on a trip and entrusted money to three servants to invest for him.  When he came back two of the servants had doubled the money so he awarded them more.  The third gave him back what he had given to him.  He guaranteed the return of the principle.  The rich man took his away giving it to the other servants and told him, “You should have done something with it to make money.”

Jesus then said, “To those who use well what they are given, even more will be given, and they will have an abundance. But from those who do nothing, even what little they have will be taken away.” (Matthew 25:29, NLT)

He didn’t say go out and speculate or throw money after wild exotic investments.  On the other hand he did say to be responsible and prudent.

Why does Jesus teach about money?  Because of the good you can do with it.  Part of the equation of real return is not only taxes and inflation but also giving.  That money entrusted to you can perform a lot of good including giving some income away.  So being prudent entails more than interest on secured investments.

So what do we do?

First, adjust your focus. Realize what real return is.  Understand all the functions that money needs to provide.  Only when you truly understand this will you make good choices of how to accomplish all of your goals.  And if you plan your goals, with real returns figured in, you have a lot better chance of reaching them.

Second, understand you probably need some growth investments to accomplish your plans.  It can be in balance with interest generating investments to give you a level of comfort.  But you’ll probably need real growth to stay ahead of the curve.

Third, trust God will ultimately take care of you.  If you trust in your investment account as your security you’ll become obsessed with it and afraid to release it to do what it’s meant to do.  If you trust God to provide for you then the money simply becomes a tool to help you accomplish your goals.  And that trust gives you courage to stay with your plans in the midst of the normal ups and downs of the economy.

Fourth, figure in sharing some of your income.  Giving is an act of faith which releases you from fear.  When you focus on giving to others you suddenly get creative about making more and conserving what you have.  It sets up a succession of positive things that come back to you in even more abundance.  It gives your life meaning and purpose which is fulfilling and energizing.  And God promises to give back to you more than you give.

With this focus you’ll be free to enjoy life and live in the abundance God wants you to have.

What’s your focus?  What’s holding you back?  Isn’t it time to move ahead into the blessings God has for you?  Let me know what find.

If this post has helped you please let me know and share it by email, Facebook, Twitter, or personally.  I would appreciate it. D

This series is based on principles from “16 Rules to Investment Success” by Sir John Templeton, the legendary investor and money manager.

Important Disclosures:

Douglas Armey, the LPL Financial adviser associated with this website, practices in Fresno, California and may discuss and/or transact business only with residents of the following states:  California, Idaho and Oregon.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results.

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