1. Investor’s Retirement Investment Policy must be long-term:
- When do you want to retire? Five years, ten years, fifteenth years, or longer?
need a “Date Specific Retirement Plan.” - Select the Investment Time Horizon or Investment period between 5 to 30 years.
- What is the dollar amount available for the investment program? a single
Investment amount? The periodical or yearly investment amounts over the
Investors – Investment Time Horizon? - The investor must recognize that the funds to be invested are for retirement fund growth and are not for current discretionary expenses. instead, the funds are strictly for long-term investing or asset-related expenses.
2. Employ the Theory of Compounding:
- Time exerts the most significant influence on your investment portfolio than any
other force, including taxes and inflation. - With the reinvestment, you earn a return, an additional return on that return, and so on.
- It is essential to start investment savings early to benefit from the power of
compounding.
3. Employ the Theory of Compounding:
- An investment strategy is to prevent the loss of the total investment capital.
- For the investor to use the capital preservation strategy to achieve its goal, the
investor must ensure that their investment portfolio produces a return that equals inflation.
4. Each investment must have a well-defined exit strategy:
- Return of Capital is the date of an investor’s total investment return (initial and
subsequent investments). - The investor must know the date the investment will have the Investor’s Return
of Capital. - Return of Capital investment is not income. Therefore, the return of Capital is not
a profit gain of any type. - The investor will need to plan subsequent investment alternatives (after initial
investments) with the knowledge of the exit strategy for the ongoing or any new
investment. - Return on Capital is the measure that quantifies how well an investment
generates cash flow relative to Capital invested.
Investor recognizes that there are two parts of an investment- return on capital
and return of capital.
5. Investor needs to maintain a comfortable Risk to Reward Ratio:
- Risk is the chance that an investment’s actual return will be different than
expected. Risk includes the possibility of losing some or all of the original
investment. - The more significant the investor’s amount of Risk is, the greater the potential
return (reward). the investor will require additional compensation for taking on
additional Risk. - The investor needs to understand the outcome of Investment Risk.
6. Investor needs to be comfortable with the Liquidity of the Investment:
- Liquidity is the ability to convert an asset into cash quickly.
- The investor needs to understand the merits of the investment Liquidity.
7. Investor needs to understand the effects of inflation on investment:
- Inflation moves the retirement planning target date further out.
- How to minimize the impact of inflation on the returns “on” and “of” the
investment? - Can the investment be the index to reduce the effects of inflation?
8. Investor needs to minimize the effects of federal and state taxes.
- Taxes significantly affect returns on retirement investments by reducing the total
returns over the investment period from 35% to 60%. - Investors need to know they can hold alternative investments such as real estate
in their self-directed IRA or individual 401(k) account. - Investors should use self-directed IRA accounts to allow tax-deferred or tax-free
growth returns.
9. The investor and its consultants must make the necessary effort (due diligence) to evaluate the Investment Sponsor’s offering for the investment opportunity, including the Private Placement Memorandum (PPM) and all other solicitation documentation. In addition, there needs to be full disclosure of the investment opportunity.
10. Select a Sponsor who is professionally trained and dedicated to implementing the
Commandments.
