Page 226

Unfair Advantage as governments, big and small, go bust and inflation rises, retirees are finding out that savers who saved money in bonds are losers. Municipal bonds are IOUs issued by states, cities, hospitals, schools, and other public institutions. One advantage of municipal bonds is that many are tax-free income. The problem is that municipal bonds are not risk-free. Millions of municipal-bond investors are now finding out that the municipal bonds they invested in are in serious trouble. In the United States, more than $3 trillion are invested in municipal bonds. It is estimated that two thirds of those bonds are now at risk because these public institutions are broke. If more money is not pumped in, the United States could implode from the center as states, cities, hospitals, and schools begin to default, just as subprime homeowners defaulted and stopped paying on their home mortgages. The bond market is the biggest market in the world, bigger than the stock market or the real estate market. The main reason it is the biggest is because most people are savers, Level 2 investors. Unfortunately, after 1971 when the rules of money changed, savers became the biggest losers, even if they saved money by investing in bonds. Remember that savers, bondholders, and most people who save money in a retirement plan, are people who park their money, investing for the long term, while professional investors move their money. Professional investors invest their money in an asset, get their money back without selling the asset, and move their money on to buy more assets. This is why savers, who park their money, are the biggest losers. Level 3: The I’m-Too-Busy Level This is the investor who is too busy to learn about investing. Many investors at this level are highly educated people who are simply too busy with their careers, family, other interests, and vacations. Hence, they prefer to remain financially naïve and turn their money over to someone else to manage for them. This is the level that most 401(k)s, IRAs, and even very rich investors are at. They simply turn their money over to an “expert,” and then hope and pray their expert is really an expert. 217

Profile for Jamiel Cotman

Unfair advantage ebook  

by Rich Dad, Robert Kiyosaki

Unfair advantage ebook  

by Rich Dad, Robert Kiyosaki

Profile for jfcotman
Advertisement