Dave: Invest 15% for retirement
CW: Set realistic retirement goals, including how much you want to have and when, and work toward them.
Why the difference: 15% may work for some people, but may deprive others. For instance, my fiance and I plan on saving 35% of our income toward retirement. We have very little debt, and live simple lives, so this is possible. We can retire sooner, and give sooner. Others may not be able to save 15% and cover living costs. Save what you realistically can.
Dave: Build wealth by investing in good growth stock mutual funds with at least a 5 year track record and by paying cash for real estate.
CW: Invest passively in stock and bond market index funds. Invest actively in private or publicly traded businesses and personal lending.
Difference: Less than 20% of actively managed mutual funds (the ones Dave recommends through his ELPs) beat total stock market index funds. Meanwhile all, 100% of them, have higher fees and turnover ratios that increase taxes. For an actively managed mutual fund to beat an all-market index fund, it wold have to substantially outperform it to make up for the fees.
Also, as you get older, you need to adjust risks. Anyone who is 65 with 100% of their wealth in stocks is playing with snakes. Bond funds are more conservative and the older you get, the more your wealth should be tied in fixed income securities like bonds.
I don’t know about you, but I dont think the average American, even if they manage money well, can realistically buy multiple real estate properties with cash JUST TO INVEST. I dont have $200,000 to plop left and right. Dave does, because he makes millions each year. We need something that works for us.
Companies like Facebook and Twitter may go public in the future. Do you think they’ll grow? Then you may want to invest money in these companies. Is a friend of yours starting a business that you think will thrive? Invest, its an opportunity. Always stay in control of your money, instead of allowing stock pickers to confuse you about whats happening while promising huge returns.
Lending money and charging interest (get a lawyer to draft the promissory notes) is a great way to grow wealth without dealing with the volatility of the stock market. You just have to worry about a person repaying the loan.
I think Dave’s strategy is a sound one for the people in the right circumstances. Like someone said above, you should have your own strategy based on your own goals and attitude to risk etc. A well balanced portfolio is always a good bet to spread the risk.
Also be sure to search for the best annuity rates when you retire as even a small difference in rate can lead to a lot of extra (or lost) income over the term of your retirement.