Introduction
Ever heard of a money magic trick? That’s right! There’s a trick financial institutions use, and it can be quite sneaky. They talk about something called “average returns.” It sounds simple, but it’s like a magician’s trick, it’s all smoke and mirrors. Today, I’m going to help you see through the smoke and understand what it really means. This is important because knowing this can help you take charge of your money for the future.
The Misleading World of ‘Average’ Returns
Imagine you have a chocolate bar, but your sneaky friend eats half of it one day (that’s a negative 50% return on your chocolate!). Now, you have a much smaller chocolate bar. Your friend feels a little badly and decides to give you a piece of chocolate that is half as large as you currently have.
If you do an average of these two chocolate transactions, you add the -50% you lost on the first transaction and the +50% you gained on the second transaction, divide them by two (because it’s an “average”), and get 0%!
But that’s not what really happens, is it?
While your average return may calculate to zero, you no longer have a whole chocolate bar. Your friend took half of the chocolate bar on the first transaction. You were left with a smaller candy bar. They gave you 50% of your current amount of chocolate on the second transaction. But that didn’t restore your whole chocolate bar. You now only have 75% of what you originally had.
This means the “average” isn’t really showing what’s happening to your money, or your chocolate!
A Real-World Example
Imagine if you were saving money for a trip. You start with $1,000 in your savings account. Then, something bad happens (like your car breaks down), and you lose half your savings because you need to fix your car. The next year, you do extra chores and increase your money in your savings account by 50%. But even then, you don’t have your $1,000 back. You’ve only got $750, not enough for the dream vacation.
So, we see that average return (0%) and actual return (-25%) can, indeed, be very different. This is why it’s dangerous to believe in the ‘average’ returns. It might seem like everything’s okay, but actually, you’re losing money.
Your Friend Zero: The Hero in Disguise
But here’s a secret – sometimes, having zero can be good! Like when you’re playing a soccer game and the other team scores zero goals. Our strategy for managing money is completely different. Instead of relying on stock market investing which has unpredictable hills and valleys. Our insurance-based strategies ensure you NEVER lose money. Guaranteed.
You might be wondering: what happens in a bad year? The worst-case scenario is zero returns. You might not gain, but you do lose. Your money is safe.
Even when things look bad- stocks are down, there’s a recession, or inflation increases- we make sure you don’t lose anything. Because we believe that the WORST you should ever do is zero – remember, zero is your hero!
