David takes a few minutes to reflect on the year and encourages his listeners to go serve someone else.  Take the time to focus on someone else. It truly is better to give than to receive. There are endless opportunities right in your city and around the world for you to take part in serving others. Go do it!

The picture to the above is David with some kids in a small community of about 1,200 people in Nicaragua. They are standing in front of a brand new well that was drilled and installed. For more info Google Living Water International. Previous to this well, the community had no access to clean drinking water. There are over 700 million people in the world without access to clean water.

David talks about some great upcoming shows as well as some other exciting developments in the area of mortgage planning. David mentioned his blog post: Achieving the lowest Interest rate. 

1. Accumulated MoneyDavid talks about the three types of money in relation to mortgage planning.

2. Lifestyle Money

3. Transferred Money

David and JT chat about his Christmas injury and a Devan?

David references his Blog Post: Opportunity Cost and Compounding Interest

Tune In, Listen and Learn!

You can reach David anytime by calling: 501-218-8880

MERRY CHRISTMAS!

This week John Little joins David in the studio to talk about the number twelve.

Many things are associated with the number twelve. There are twelve months in a year, you can buy cookies, doughnuts and eggs by the dozen, and of course, there’s the twelve days of Christmas. There’s also that elusive 12% average rate of return that Dave Ramsey, the popular financial talk show host leads his faithful followers to believe they will easily achieve by investing in mutual funds.

David and John dive right into this important topic. It’s important to separate fact from fiction.  Dave Ramsey has benefited thousands of people who are in a constant cycle of debt. He is to be commended for helping people in this regard. However when he shifts to the subject of accumulating wealth, much of his advice is misleading at best.

We encourage you to do your own research. Just because someone teaches Dave’s course in your church or you read one of his books doesn't make it the truth.

We outlined in the Financial Peace? Podcast some of the statements that he has written can be disproved with math. Again, don’t take out word for it, do your own research.

In the real world, there are real issues that affect the mutual funds that Dave Ramsey advocates.

Take the following snapshot of the S&P 500 Index.  (To view, click on "Extras" within Your David Lukas Show App) While it I impossible to predict the future course of any investment, we can test this hypothesis through the use of historical data. We do know what the equity indexes produced in the way of historical returns. See the S&P 500 index on this page (1992-2011) we can look at that performance using some basic assumptions to determine how an individual might have seen their assets accumulate over that time period. As you can see, the index averaged 9.58%.

With that in mind, since we live in the real world, we have to take into consideration the following:

1. Average rate of return vs. real rates of return: There is a big difference between average rate of return (adding up 20 years worth of returns and dividing by 20) and a real rate of return. Real rate of return is the rate of return your investment would have received had it actually been invested over the time time period (1992-2011) Because downturns in the market are magnified over time (if you lose 20% in one year, you must earn 25% the following year  just to break even)  Over the past 20-years the REAL rate of return was 7.8%

2.Single Payment VS. Multiple payments:  In the real world, most individuals invest over time. One potentially misleading aspect of advertised returns is that they are predicated on a single investment made at the beginning of a given time period. But as we know, that's not how most people accumulate wealth. In reality most people invest over time, not in one lump sum. If we assumed 20 equal annual payments on January of each year, the real rate of return for our dollars drops from 7.8% to 5.92%. 

3. Managed Portfolio Cost: Most of the advertised projections fail to take into consideration management cost. Once again, in the real world that isn't usually the case. At some point, somebody needs to get paid to manage money. Either a mutual fund manager, fee based adviser, stock broker or some other entity will most likely be compensated. If we assume a 1% annual management fee, the rate of return now falls to 4.82%

4. Management fee alternatives: There are alternatives that could be pursed by those wanting to avoid management fees. A popular one today is an exchagne traded fund (ETF), which invest in  an index and requires no management. Had the annual payments been made to an ETF which invested in the S&P 500 index, no management fees would have been paid. But the real return would have been only 3.77%  instead of 9.58% Why? Because ETFs reflect price changes only, there are no dividends, and dividends have historically generated somewhere between 1.5% and 4.00% of the S&P 500's rate of return when reinvested back into the index.

5. Taxes! In the real world, we have to consider taxation. Ultimately, taxation reduces the amount of assets that can be used. If we assume taxes are only due at the end of the period and we use a long-term capital gain rate of 15% the return would be 4.27%  That is less than half of the advertised rate of return for the past 20-years.

The above scenario reflects the real world and in the process one put their money at risk. When someone ask you to put your money at risk, ask yourself this. Who's money is at risk? Mine or the person making the recommendation?

If you would like to contact David or John to discuss this or any topic in detail,  you can call 501-218-8880.  Tune in, listen and learn!

Neither Wall Street, nor the government wants an informed public. Your best defense is an informed mind.

“An Investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative” -Benjamin Graham, The Intelligent Investor (considered one of the best investment books of all time)

This show is dedicated to Val Wheeler who recently passed away on October 23rd, 2012. Val was 56 years old.

Val was David’s Business Partner and friend. He was a generous man who gave of his time and resources. Listen in as David talks about Val and the short time he had the honor of knowing him.

If you would like to listen to the two shows that VAL joined David in the studio, you can listen to those by clicking on the following two links: “Proven Business Systems” and “Mortgage Payoff Strategies“.

David discusses the need to be committed to self education. More than ever, it is imperative that we recognize that the past does not necessarily predict our economic future. The answer isn’t in finding that “magic” rates of return or specific financial product. The answer lies within the process of educating yourself on issues of economics, banking and money.

In light of the loss of our great friend Val Wheeler, David talks about The Human Economic Life Concept which is given little thought by the average person. This is a concept that Val understood very well.

Few people understand the greatness of life insurance as a multifaceted financial tool. It’s not just a death benefit, but also a wonderful financial tool that has actively been put to work for over 150 years by the country’s corporations and wealthy individuals. In particular, The Nations Banks understand the value of Permanent high value Life Insurance. Click HERE for to read for yourself.  Also for more info on this topic listen to The Pirates of Manhattan Podcast

Unfortunately, 95% of financial professionals do not know how to properly structure a whole life policy. The majority of people do not reject the human life value concept or the wonderful economics of permanent life insurance once they understand it. The problem comes down to cost. It’s imperative that you work with a high end life insurance or other financial planner for viable strategies which enable them to structure the correct cash flow strategies. Most often, it’s simply a matter of re-positioning cash flow to maximize the efficiency of money.

When setup properly, you can achieve the following:

1: Tax Deferred Growth,
2: Tax Free Distribution,3: Competitive Return,
4: High Contributions limits,
5: Collateral Opportunities,
6. Earn guaranteed compounding interest with NO market risk.
7: Guaranteed Loan Option,
8: Unstructured Loan Payments
9: Liquidity, Use and Control of your money today, while your money never stops compounding.
10. Additional benefits.

Lastly, when High Cash Value Life insurance is properly applied to your economic situation, lost opportunity cost in drastically minimized. What is lost opportunity cost? READ HERE

If you would like to work with a high-end life insurance agent or financial planner who can educate you further and put these concepts to work for you, please contact Infinite Financial Services at 501-821-8880 or visit them online at: www.InfiniteFinancialServices.com

In honor of Val Wheeler. Val was a pioneer in the industry. He passionately helped so many people in so many ways. Val understood the concept of human economic value and was passionate about helping people acheive the financial goals they never thought possible. You will missed.