The Prosperity Blog

Did Your Broker Mislead You? Why Real Returns Don’t Equal Average Rates of Return

Let’s examine one of the “unintended consequences” of volatility: poor returns that don’t match expectations.

There’s a dirty little secret in the financial world, and it’s this: “The Average rate of return doesn’t equal Actual rate of return.” We say this often to clients, readers, and advisors so they can understand why investments rarely grow as much as you expect!

I explain the “average vs. actual” rate of return concept in one of my Money Myth videos: “Money Myth #6: Average Rate of Return Reflects Actual Rate of Return.”  And we even prove it on calculators at Truth Training, the training my husband, Todd Langford, conducts with advisors and other financial professionals.

It’s why money earning “an average rate of return of 10%” might actually grow by only 7 percent per year! In this article, we’ll look at a new way of expressing this truth, drawing from some savvy analysis and commentary from Hans Wagner. We’ll also add our own observations about why it matters and what you can do about it!

Following a disciplined process using sound investment principles over many years, Wagner was able to quit his job at 55, “retiring” to the work of writing and teaching about investing. In his article in InvestingAnswers.com, “CAGR vs. Average Annual Return: Why Your Advisor is Quoting You the Wrong Number,” Wagner demonstrates:

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Buying Real Estate in HOT Markets – Episode 407

Real estate is one of the most talked about topics in the financial world right now and the large institutions are getting in, especially in the residential markets. Check out more about real estate in this episode as Kim and Spencer dive deep into this topic. 

Best-selling author Kim Butler and Spencer Shaw show you how to take more control of your finances. Tune in to The Prosperity Podcast to learn more about Prosperity Economics thinking and strategies today!

Do you have a question you would like answered on the show? Please send it to us at hello@partners4prosperity.com and we may answer it in an upcoming episode.

Links and Resources from this Episode

Show Notes

  • Buying a large home – 1:47
  • Where the money is coming from – 2:09
  • Permanent capital – 2:4
  • House prices rising – 3:54
  • Knowing what’s important for you – 10:15
  • Purchasing based on speculation – 10:53
  • Don’t speculate – 13:20

Special Listener Gift

Kim Butler’s groundbreaking eBook/ audiobook explains why typical financial advice may be sabotaging your wealth… and what to do instead! 

Review and Subscribe

If you like what you hear please leave a review by clicking here

Subscribe on your favorite podcast player to get the latest episodes.

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How Safe is Your Money? Fractional Reserve Banking and Other Threats

“You’re thinking of this place all wrong… as if I had the money back in a safe. The money’s not here. Your money’s in Joe’s house…right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others. Why, you’re lending them the money to build, and then, they’re going to pay it back to you as best they can.”
—George Bailey, It’s a Wonderful Life

How Safe is Your Money?

These famous lines from Frank Capra’s holiday classic, It’s a Wonderful Life, have been used to explain how banking works, though the details don’t exactly reflect current realities. Today, we WISH that our banks were as conservative as George Bailey’s fictional Building and Loan. If John could only borrow what Sally had originally deposited, there would be less risk!

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Time Value of Money – Explained – Episode 406

The time value of money isn’t a commonly discussed concept but by the end of this episode, you’re going to look at money differently and how your money is spent and invested. 

Best-selling author Kim Butler and Spencer Shaw show you how to take more control of your finances. Tune in to The Prosperity Podcast to learn more about Prosperity Economics thinking and strategies today!

Do you have a question you would like answered on the show? Please send it to us at hello@partners4prosperity.com and we may answer it in an upcoming episode.

Links and Resources from this Episode

Show Notes

  • What’s the time value of money? – 0:51
  • Money in our lives exist in time – 2:03
  • The world of finance and the basic personal financial space – 2:49
  • Time value of money and the passing of time – 4:50
  • Inflation as an aspect of the time value of money – 5:52
  • How Spencer explains time value of money – 7:00
  • Most do not have the financial education about time value of money – 12:30
  • About compound interest – 13:52
  • Bitcoin and cryptocurrency – 16:00
  • Cash value life insurance – 17:16
  • One of the nice things about the Truth Concepts Calculator – 19:43
  • Find out about the personal finances arena with a Truth Concepts Calculator – 22:41

Special Listener Gift

Kim Butler’s groundbreaking eBook/ audiobook explains why typical financial advice may be sabotaging your wealth… and what to do instead! 

Review and Subscribe

If you like what you hear please leave a review by clicking here

Subscribe on your favorite podcast player to get the latest episodes.

Read More

The Beneficiary Checklist: 7 Mistakes to Avoid!

The Beneficiary Checklist

Do you intend to leave a legacy? Utilizing life insurance and selecting beneficiaries for your policies and/or other accounts make leaving legacy gifts simple, keeping them out of probate or the state courts. That is… unless you make a critical mistake. We wrote this beneficiary checklist to help you avoid it!

You’ve put a legacy in place that assures loved ones and/or your favorite charities will receive monetary gifts according to your wishes. There are a handful of mistakes we see people make when it comes to naming beneficiaries or keeping them up-to-date.

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