Tuesday, October 17, 2017

How the Ultra Wealthy Invest for Upside By Minimizing Risk

How to Participate in Market Upside Without Any Downside with Sam Prentice

If you want to be able to access your money so you can invest it when the opportunity hits, the one of the worst places to keep it is a checking account.

A better option to grow your wealth is by using a capital warehouse strategy.

Sam Prentice is a senior wealth strategist and co-founder of Wealthpoint. He is an expert in creating additional cash flow out of the money and assets you already own.

In an episode of the Freedom Fast Lane podcast, Sam explains the capital warehouse strategy and shares his thoughts on long-term debt, the economy and cash flow.

Why long-term debt is good for your balance sheet

Sam explains that it’s a bad idea to use cash to pay for a house. Long-term debt is designed to transfer wealth from the lender to the borrower.

The real way wealth is distributed is through inflation, which is the most effective tax we have right now. Long-term debt hedges your balance sheet against inflation.

When used properly, debt is a tool to grow your wealth. By borrowing against a house and using money on other assets, you can fund other businesses and put money into other cash flow scalable investments. This strategy is what creates big money ROI on borrowing.

Participate in the upside without having risk in the downside

Investment opportunities can be missed if you don’t have liquidity with your money.

By using a capital warehouse, you’re not limiting the upside as you can still participate in growth. When there’s a downside, you still have access to capital and can buy assets which are going down in value.

Your money could be growing tax free, with the ability to leverage it and keep it liquid.

Sam’s predictions on the economy

When asked about what will happen in the economy over the next 18-36 months, Sam says it’s a coin flip at the moment.

He is of the belief that we will witness a market correction. The economy has been at an eight year high, and reports don’t support stock growth. We are in a bubble.

A capital warehouse allows you to play both sides of the coin. We may only experience a few economic downturns in our lifetime, so we want to take advantage when they hit to make more money.

There is an opportunity cost of not investing when the downturns hit. A capital warehouse allows you to have that exposure to avoid the opportunity cost.

How Wealthpoint turned a $800k loan into $8m of cash flow

One Wealthpoint client Sam worked with had a net worth of around $1.8 million, with $1.1 million of that being his personal home which had been paid off.

Sam advised that an $800k loan on the property could be used to invest in other opportunities. By taking that money and putting it into a 5-7% interest capital warehouse with liquidity, over 20-30 years, his client’s balance sheet would hit around $8 million from the asset re-transfer.

As the economy changes, the purchasing power of the dollar will be eroded so it will feel like fewer dollars are being used to pay off the loan. Having that loan also saved his client from opportunity cost, as he could then invest the money for more cash flow.

Connect with Sam

Head over to GoWealthpoint.com to start making tax-free interest on your money.

Sam on LinkedIn

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