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Ten Things About Which I Am Certain

This time of the year all sorts of lists begin to appear, so I submit one of my own.  Since life is filled with so much uncertainty, here are ten things about which I am fairly certain.

  1. The low cost index mutual fund is one of the best investment vehicles available to most of us.  Over almost any time period, index funds beat the majority of their actively managed counterparts.  The longer the time horizon, the more pronounced the difference in performance becomes.
  2. For most, finding ways to save more is far more important to long-term financial success that finding the perfect investment.  Read this slowly; enunciate properly.
  3. The power of compound interest is the saver's best long-term friend. Impress this on your children and convince them that the sooner they begin saving, the longer this magic can work for them.
  4. Most folks should avoid investing in variable annuities. This rule may be suspended in certain years when you have contributed every possible dime that you can to every other tax-advantaged plan available to you. Even then, other choices may be available that are probably better as most variable annuities are expensive and ill-liquid.
  5. No one on earth, and I do mean no one, knows where the market is headed in the short term.  If they did, they certainly would not tell us.   Thus, you should pay almost no attention to the talking heads in the media.
  6. No amateur should have a 2 iron in his bag.  Enough said!
  7. Most Americans do not want to be told the whole truth, especially by their politicians. The fact that we continue to elect folks who are more than willing to withhold the whole truth from us verifies this observation. And many politicians are only too happy to accommodate our aversion to the whole truth as this makes their re-election so much easier, and most are really into getting re-elected. You see, that elected position, especially at the federal level, is a really sweet gig.
  8. The fact that an individual of average intelligence cannot sit down and in an hour or two determine his federal tax bill is a national disgrace. Although tax simplification is mentioned from time to time in political discourse, no real tax simplification is on the horizon. The monies spent on accountants, tax attorneys, other tax preparers, and the humongous IRS bureaucracy represents another huge and onerous tax on the American people and our economy.
  9. All classes of assets will eventually go both up and down in value. Those who thought that real estate was exempt from this law have discovered otherwise.
  10. Social Security and Medicare will not survive long term in their present forms. This observation is the result of simple mathematics. However, they are very likely to survive in some fashion. Some form of these programs will be there not only for you, but for you children as well. You see, love them or loathe them, these programs are vitally important because they have made retirement tolerable for many, many folks who would have otherwise suffered greatly in their later years.  The changes coming to these programs may be painful, but the days of kicking the can down the road are rapidly coming to an end.  Let us hope that those with the power to effect the needed changes to these programs show the necessary courage and wisdom soon. The longer the wait, the sicker the patient, and then, the harsher the treatment.

I am fairly certain of several other things as well (the love of God, the importance of family and friends, etc.), but these types of lists have historically extended only to ten items, so I will follow convention. You can probably add a few items of your own; feel free to do so.

Remember, money is not the most important thing, but still, money matters.


Mike Ryan

Seven Oaks Financial Planning



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