The Wealth Code 2.0: How the Rich Stay Rich in Good Times and Bad

Appendix B: Different Investment Asset Classes

Static Stocks, Bonds, Mutual Funds

This refers to any stock, bond, mutual fund, or derivative that is held for more than one year. I call this the “hope and pray” leg of the financial table. The vast majority of investors only know this asset class. This asset class tends to do well in bull markets. Since 2000, however, the problem is that we have been in a bear market, and this secular trend will most likely continue for many years.

This is the asset class that most applies to the classic brokerisms, “Buy and hold,” “Dollar Cost Average,” and so forth. Since most people know this category well, we won’t spend much time on it. I will reiterate a few points from previous chapters for clarification.

As with all investments, you should be aware of the real investment fees. Over time, fees tend to be a factor that makes or breaks a financial tool’s long-term performance. If you hold equity positions within a wrap account (assets which are charged a fee based on account value), be aware of the hidden stuff, which further compounds the issue. If you are pulling income from stock and bond positions, as previously discussed in the leaks chapter, be aware of the long-term effects of sideways markets and how pulling income and fees intensify the losing years and detract from the winning ones.

With bonds, consider that we are at historic interest rate lows in 2012, and the only reason rates are where they are is due to the Federal Reserve’s quantitative ...