“The Secret ‘Mutual Fund’ that NEVER GOES DOWN”

By Travis Johnson, Stock Gumshoe, January 30, 2012

Steve Sjuggerud is teasing us with something genuinely compelling as he urges us to subscribe to his True Wealth newsletter: investments that NEVER go down.

Really?

Yep, his pitch is that he has three kinds of investments that, if taken together, can be considered to be a “mutual fund” that never goes down. They’re not actually a mutual fund, of course, that would be too easy — but apparently they provide some sort of diversification and, most importantly, they protect against loss of principal.

Anyone who has lived through the last four years in the stock market will instantly light up a little bit at that “never goes down” part — which is, of course, why the copywriter put that in the headline. And then followed up with this jabber that makes it seem even better:

“There are no fees… no marketing department… and no salesmen or brokers.

“But the three assets that make up this unique “fund” have beaten the stock market by as much as 165% over the past decade, and are among the only investments in the world that are guaranteed to never go down….

“What I discovered over the past few years is incredible—3 assets with great upside potential, which come with a contractual guarantee that they will never lose a penny in value.

“You can buy just one of these investments… or you can buy all three, and you will own what is essentially a “mutual fund” that can NEVER go down.

“What’s remarkable about this situation to me is that you are very unlikely to see any of these opportunities advertised to the general public.

“And of course, this ‘fund’ is not listed on any stock market—nor are any of the assets it contains. There’s no prospectus report. There’s basically no advertising or marketing.

“In fact, this is something you are unlikely to hear about or read about anywhere else, as far as I know.”

So what is he really talking about?

Well, he teases three investments that “never go down” — the first one he calls the “Royal Currency” and implies that Warren Buffett and Bill Gross personally use it in their own accounts. It apparently goes back almost 200 years to Great Britain, and involves some sort of government guarantee.

Here’s an excerpt of the clues for that one:

“On a research trip to London a few years back, I found a government-issued asset that has been secretly used by some of the wealthiest families in American history (like the DuPonts, Roosevelts, and Lillys), to safely build and protect wealth….

“This asset has nothing to with stocks, bonds, gold, silver, coins, commodities or any other investment asset you’ve likely heard of before. Over the past decade, I have seen it written about just once in the mainstream press, in an April 2010 edition of The Wall Street Journal.

“Some experts call this mysterious investment ‘The Royal Currency,’ because it was first issued by the Royal British Government almost 200 years ago, and has actually been used as money in many places around the world.

“But this unique investment, as it is used today, is not an actual currency. And while the British were the first to issue the Royal Currency, today almost every government in the world has its own profitable version.”

And apparently the returns have been dramatic, particularly during times of inflation:

“In fact, during the 1970s, many Royal Currency investments went up by as much as 1,000%. I’m sure I don’t have to tell you that with all the money printing our government has been doing, we’re very likely to have very high inflation in the years to come.

And even in non-inflationary times, the government-created Royal Currency does extremely well. A different index created by a private firm shows that this unique investment has gained 209% since 1998.”

There is at least one little disconnect here — apparently there is the government-related “royal currency” out there, but the way to get it with the “never goes down” guarantee is privately sold …

“You can make an investment in the Royal Currency that is guaranteed to Never Go Down….

“I have located the best Royal Currency broker in the world. They have been in business since – get this – 1856. That’s more than 150 years….

… when you make a Royal Currency investment with this brokerage, you will receive a written contract that guarantees you cannot lose money over the next five years. In other words, the worst you can do is break even. I believe you could double your money, easily – you could possibly make 250% or more. Remember, during the 1970s, this investment went up about 1,000%. ”

Which, frankly, has the Thinkolator stumped — it’s been churning and smoking over there in the corner for a good half hour, and nothing definitive is leaking out into the results bin.

So we’re left to speculate — my guess? Well, I can’t give you promises of accuracy here like I usually try to do (I generally don’t reveal a stock as a teaser solution unless I’m 99% sure it’s a match — and more typically we’re 100% certain), but here’s what I think:

For the broker that’s been around since 1856, we have a couple choices but the logical guess is Credit-Suisse, which is the only big investment bank that I know of that was founded in that year. As to the investment? Again, I don’t really know on this one — but it sounds a lot like the various market-indexed certificates of deposit that are available. And there was an article in an April, 2010 issue of the Wall Street Journal that talked up these products, though they’ve also been covered in previous articles in that paper (they were pretty popular when the market was crashing and folks were looking for downside protection in 2008 and 2009).

Here’s that article on market-linked CDs from the April 5, 2010 WSJ. They’re not issued by governments, though they do carry FDIC insurance in most cases so they are government-related. Doesn’t really sound like a great match for the “royal currency” bit, but that’s the best I can do right now. And here’s a bit more about these types of CDs from an older WSJ article.

Essentially, market-indexed CDs give you downside protection by saying that (in every example I’ve seen) you will get your principal back, guaranteed and backed by FDIC insurance. In exchange, you have to lock your cash up for a set time period, usually at least two years and more commonly longer, and you will get some portion of the return on a set index — for example, you might get any upside returns from the S&P 500 for a given time period, but with the upside capped at, say, 12% per year, or you might get half of the upward move of the index for that time period — they’re all structured differently, which makes it tough to compare them. I know HSBC sells a fair number of these, as do other big banks like JP Morgan and smaller outfits like Everbank, but I don’t know about Credit-Suisse or others. It’s perfectly possible that what’s being teased here is some other structured guaranteed principal product from another investment bank, I can’t tell you for sure based on those clues.

So let’s move on to the other two parts of the “never goes down” investment “mutual fund,” shall we?

Here’s how Sjuggerud pitches this one:

“The second component in our “Mutual Fund” that never goes down is a unique asset Barron’s calls ‘The new way to retire…’

“In short, this asset is offered by some of the richest companies in the United States….

“I call it a ‘Guaranteed Stock Contract,’ because it essentially gives you the large potential gains of the stock market… and a guarantee that your money can NEVER drop in value.

“Plus, you are guaranteed to get paid a MINIMUM withdrawal on your investment of 4% to 7% per year… which can only go up… and NEVER down.

“Right now, for example, the #1 way to make this investment is through a private company in Lansing, Michigan, which offers these contracts to Americans who are retired or getting ready to retire soon.

“What’s nice is that you have the opportunity to make money when stocks go up… but you don’t lose a penny when stocks go down. Even better, when the stock market does go up, you can lock in those gains for the life of your contract.”

And we get some more quotes from the financial press to buttress Sjuggerud’s claims:

Money Magazine says these stock market contracts, “will become the retirement investing rage.” And why the journal of Financial Planning said “they could be a magic bullet.”

Fortune magazine actually called these unique investments, ‘the best place for retirement cash.’

“The point is, investment has an unlimited upside, and it comes with a written contract that it will NEVER go down. You certainly don’t want to put all your money here… but it makes a lot of sense to use these Guaranteed Contracts for part of your savings.”

You probably won’t be surprised to hear that these are … variable annuities. Though it sounds like he’s specifically recommending a variety that mixes variable and fixed aspects to some degree, some call it a Fixed Index Annuity, meaning that they use some index (like the S&P 500, or whatever) to boost the annuity’s returns, but they also provide whatever payout guarantee the annuity insurance contract promises.

I know almost nothing about annuities, other than the fact that they are a great tool for providing some backstop to retirement income and the fact that their confusing and convoluted nature means that some investors have been bilked for massive fees from the bad seeds in the industry.

There’s a good article on FINRA for folks who want to know what pitfalls to look for in annuity shopping here.

And I’ll bet that the folks Sjuggerud is talking about are Jackson Annuities — they are in Lansing, MI and they offer a variety of these kinds of annuities. I can’t vouch for them and I don’t know anything about them other than their HQ address, but they do explain their products in this category pretty well here.

And the third “never go down” investment?

Sjuggerud calls it “The only gold investment that’s been guaranteed to NEVER go down,” and teases it thusly:

“That’s why I thought you might be interested in a unique type of investment that was created by a popular, well-respected, and very safe American bank.

“In short, what this bank has done is allow you to put your money in a super-safe FDIC-insured certificate of deposit (CD), with large potential gains, and a contract that ensures you have ZERO downside risk.

“Now all of these CD contracts are a little different. Some of them have unlimited upside, and some don’t.

“Some tie your returns to one precious metal, like gold or silver. Others tie your returns to several precious metals, or even other assets like stocks or even foreign currencies.

“But the important thing to remember is that with each one of these deals, you get the potential for large gains, and the value of your investment is guaranteed (by the bank and the FDIC) to NEVER go down.”

Toss that into the Thinkolator, and I think we must here be being teased about Everbank’s MarketSafe CDs — of which there aren’t any available right this moment.

MarketSafe CDs from Everbank are FDIC insured CDs that guarantee the return of your principal (usually after five years), and boost that by tying the CD to some other asset — they’ve done all kinds of different ones, from gold bullion to Japanese REITs to the S&P 500, but the most recent ones have been based on diversified commodities. They offer these up at specific points and they have a fixed time return and carry a guarantee only if you hold them to maturity, so you can’t just start one up whenever you want, you have to wait until one is offered.

The most recent one they offered launched last August and provided upside based on the average return of five different metals over the next five years, with a cap of 50% for each metal (so if gold goes up 1,000% and copper, silver, etc. all go down by 15% each you would get no premium return, since the gold gain at a capped 50% is more than made up for by the combined losses of the others). You can work out those pluses and minuses yourself if they choose to offer this kind of CD again, Everbank has been the pioneer of this for small individual investors but there may also be other banks doing this for precious metals as well, I just don’t know them. You can get an idea of the terms in the sheet for that CD they started last August but, as I noted, they aren’t selling any today (their MarketSafe sales page is here if you want to browse around). I’ve used Everbank for some foreign currency CDs, but haven’t tried the MarketSafe stuff personally.

So as you probably guessed, there are ways to get guaranteed returns on your investment — or at least, to have your principal protected. They range from the typical stuff you already know like plain vanilla CDs to the complex structured products offered by big investment banks, with a vast range of different kinds of annuities and insurance contracts mixed in the middle. The risk of all of these is not so much that you will lose your principal (assuming the annuity is backed by a strong company, and that you choose a CD that is FDIC insured), but that you will lose a substantial portion of the potential upside in whatever investment it is you’re considering — a choice between risk and safety that every investor has to make on their own, preferably with the help of a financial advisor you trust who can run the possible scenarios with you.

I have never dabbled in annuities, don’t understand insurance accounting or contracts, and have never tied up my money in a CD for longer than a year, so I’m not an expert on much of this … but I’ll be that there are folks out there in the vast Gumshoe readership who know this stuff inside and out — if you’d like to opine, feel free to do so using the friendly little comment box below. Thanks!

Oh, and if you’re one of those folks who has to jump on things in a frenzy because your favorite newsletter writer writes it up as a hot recommendation — don’t! Most of these kinds of investment contracts require you to tie up your money for a considerable time, please think it over and know the terms before you choose one.


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44 Comments on "“The Secret ‘Mutual Fund’ that NEVER GOES DOWN”"

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Parry laird
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Parry laird
January 30, 2012 2:13 pm

Many years ago. a product that fit this description (sort of) was very popular. MITTS was the acronym they went by and they have no downside…all upside.

hedy1234
Irregular
422
hedy1234
January 30, 2012 2:18 pm

The reason your Thinkolater got bogged down on the first one is because it is farther out of the box than CDs or Stocks/bonds.
He is talking about…… wait for it……. stamps.
He has a stamp vendor who will guarantee to buy back your stamps. Minimum investment……… wait for it…….. $15,000.

John
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January 31, 2012 2:32 pm

When Fenime & Fedimac were popular, one of their feature which was repeatly touted was that they were guaranteed by the US government. What happen today? You know what happen today. When Dr. Sjuggerud recommend Iceland bond, the characteristic touted was that is was guaranteed by Iceland government and it had a high yield. You know what happened to the Iceland bond. Take a grand of salt whenever you heard the word “Guaranteed”.

FM
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FM
January 30, 2012 2:40 pm

Stanley Gibbons are the stamp vendors in London

gene olson
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January 30, 2012 2:47 pm

As as retired investment broker, I always warned my clients that return of principle does not guarantee return of buying power. $10,000 five years from now will not buy what $10,000 buys today.

Blackwater
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Blackwater
January 30, 2012 2:49 pm

Stanley Gibbons

Fabian
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Fabian
January 30, 2012 2:49 pm

Be careful with these guaranteed capital instruments and look well at who is the real debtor.
Credit Suisse issues a bunch of them and they did in Switzerland before the crash. Allas the debtor was Lehman and people thought they invested with Credit Suisse. They were pushed into retirees and retirement accounts, of course. This was not a small scandal and if I recall well they decided to make good for Lehman.

Harrison Kornfield
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January 30, 2012 2:49 pm
The first “secret’ is an British stamp company, in business since 1865, named STANLEY GIBBONS, ON STRAND, ACROSS THE STREET FROM THE SAVOY. 10000 POUND LIMIT, 5 YEAR CONTRACT, GUARANTEED PRINCIPLE, OR WILL SELL FOR 30% OF PROFIT. OR KEEP STAMPS, OR SELL PART OF HOLDINGS. STAMPS SELECTED BY COMPANY OR BY BUYER. Has audited financials for view, no debt. DETAILS AT http://WWW.STANLEYGIBBONS.COM/TRUEWEALTH. No sales commission to True Wealth. NOTE: NOT REPORTABLE TO IRS. CAN ARRANGE for deal, VISIT LONDON AND PURCHASE IF PLEASED. Not for me (age 80) but wished I ‘d heard of this earlier. Travis-this looked very… Read more »
Bill Duschatko
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January 30, 2012 2:52 pm

Stamps, through Stanley Gibbons, and you hit it right with the Everbank CD’s, which of course are not currently offered.

profmad
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profmad
January 30, 2012 3:11 pm

Around the time that portfolio insurance was in vogue (1985 – October, 1987, I think) the idea did not depend on third parties to get a ‘Mutual Fund’ that NEVER GOES DOWN. All you had to do was buy a Treasury note that you were willing to hold to maturity and combine it with a long maturity call on some stock market (or commodity) index.

Can anyone explain why the current versions of ‘Mutual Funds’ that NEVER GO DOWN should be any different?

Al
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Al
January 30, 2012 3:37 pm

A similar idea that has received a lot of play lately is the purchase of nickles. Supposedly the metal content of nickles is valued higher than 5 cents, thus if a person pays 5 cents for a nickle it will retain that value as a floor. If the price of the metal goes higher, the value of the nickle goes higher as well; similar to older dimes, quarters, half-dollars and dollars.

Ventureshadow
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Ventureshadow
January 30, 2012 7:17 pm
If their stamps go down a lot in value, Stanley Gibbons goes out of business. That will be the end of the guarantee and presumably also of your stamps in their possession. In the USA most new stamps that are less than 70 years old are typically worth below face value, yes that is LESS than face value., and you might as well use them for postage. As they say, if you can’t beat ’em, lick ’em. So much for my boyhood stamp collection. Gibbons’ stamp plan seems to have some apparent resemblance to a Ponzi scheme. Indeed, the original… Read more »
Sam
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Sam
January 30, 2012 8:51 pm

I have heard about some annuities that they only go up. If S&P goes down during a particular tear the value of annuity will remain same for that year and will not goes down. Then there are choices sectors also one can chose.
Sorry, I do not remember the company name, but I know it is a big company. I wish, I had transferred my most of the investment in 401K just before the bubble melt down in the year 2000. In fact this company agent was pushing me hard; I saw in his office many people did it.

Irontail
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Irontail
January 31, 2012 8:06 pm

AVIVA is a big one – have done business and they seem solid. Growth (never a decline) annuities are their bread and butter. So far so good. Check ’em out.

Richard Scott
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February 1, 2012 9:13 am

The Aviva contract has several issues which better products available from other insurance companies do not; for example,very low caps on index crediting, does not guarantee lifetime income or the “doubler benefit” for non-owner spouse on qualified funds, nullifies the”doubler benefit if accumulation value is reduced to zero through withdrawals,etc.

R Charlie Brown
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January 30, 2012 11:24 pm

I was curious as to if the banks go under (with say a stock market crash) how can the bank’s guarantee the principle, besides anything else. Know we hear about the FDIC, but how much use would it be if we saw something like the 1930’s (October 29, 1929 – 1930)?

David Hirt
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David Hirt
January 31, 2012 12:20 pm

I have been with you almost a year, and the mighty mighty thinkolator has never been stumped! Say it ain’t so.
Interesting though, but I think coins much better than stamps. However do not jump in blindly without first doing some homework. Dave

kanan
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kanan
January 31, 2012 4:19 pm

This forum is fun!!!

Wolfgang Sailler
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February 1, 2012 6:25 pm

Could the first item not be a perpetual bond? During the Napoleonic Wars the British government sold these to finance the campaign. That would also come closer to the 200 year time frame.

Woogie
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February 2, 2012 3:21 pm

The only way I know how to make money on stamps…get this.. buy them as forever stamps issued a few days right before they go up and then sell them or use them. I did and make one cent on each 45 cent stamp after the increase. If you hold these stamps over several increases then you can make more. Forever is forever.

Susan
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Susan
February 2, 2012 3:35 pm

Just found the “thinkolator” yesterday – I have learned more in two days than in five years of dabbling with other online sites. Thank you so very much!

mjqdelmar
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February 2, 2012 7:37 pm

I have used Everbank World Markets, Market Safe CD’s for the past 5 years and have been pleased with results. The only drawback is the OID (Original Issue Discount) tax which you pay each year. I believe this is for current value in excess of the stated redemption price, even though you don’t have access to that money until the redemption date. A small price to pay, I guess.

Anthony Wolseley-Wilmsen
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Anthony Wolseley-Wilmsen
February 4, 2012 11:31 am

I´d say the royal currency is gold coins, maybe proof or uncirculated eagles. Can never lose their face value, are government issued, and aswell as being a play on the gold price are also a play on their scarcity value. If you pick the right issues, you can even make money in a falling gold market; in a rising market, the gains are likely to be more impressive. Spink & Son are reputable coin brokers in London who have been around for over a century.

Mr T
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Mr T
February 4, 2012 12:37 pm
Stamps, Annuities, Everbank CD. He has pitched the CD a few times over the past few years. I don’t see there being much liquidity in stamps. I have had experience with multiple types of annuities being fixed, indexed or variable. Fixed annuities are fine if you can get in when interest rates are high and make sure the insurance company cannot lower the rates. Most insurance companies these days offer terrible interest rates an provisions to make sure the client never sees better interest rates. Indexed annuities tend to have really long surrender charge schedules, so make sure you don’t… Read more »
RCH
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RCH
February 4, 2012 4:40 pm

Forgive the pedantry, but may I suggest that our commentators review the difference between principal and principle?

John M. Chenosky, PE
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John M. Chenosky, PE
February 4, 2012 6:32 pm

R. Charley Brown says….”if the banks go under”….. You mean when the banks go under.
The FDIC has $40-50 BILLION in their emergency funds. Ask Sheila Baird how she hopes to guarantee the TRILLIONS in the US Banking System??

Charles Rynski
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Charles Rynski
February 7, 2012 11:51 am

An Equity Indexed Annuity would be my surmise as to the teased guarantee of principal.

Stansberry CS
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Stansberry CS
February 13, 2012 10:11 am

If you have any questions about Stansberry and Associates, please do not hesitate to call customer service at 1-888-261-2693. We would be happy to assist you. We are open Monday – Friday 9-5 EST.

Ira Cotton
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Ira Cotton
February 15, 2012 5:32 pm
Relative to the comments on collecting first day covers for years or buying all new issues for many years – you will never make money this way. On the other hand, buying stamps that are ALREADY rare and valuable, in top condition, and holding them in protected storage can indeed yield good returns. By rare and valuable, I mean issues that already sell for over $100 per stamp and have an established provenance. There are two grading services that will confirm authenticity and condition with certificates and, if desired, “slab” (encapsulate in plastic) the stamps for their protection. Stamps that… Read more »
John B.
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John B.
March 15, 2012 11:45 pm

When I visit a philatelic exhibition (stamp show), I see no vistors younger than 50. It is a dying hobby. Sheets of mint stamps from the 1950’s sell for a 5 or 10% discount from face value! In another 10-15 years there will be no buyers.

little larry
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April 14, 2012 3:53 am

your article mentions the government printing a lot of money:
“In fact, during the 1970s, many Royal Currency investments went up by as much as 1,000%. I’m sure I don’t have to tell you that with all the money printing our government has been doing, we’re very likely to have very high inflation in the years to come.
it doesnt, though. the federal reserve, a private fractional reserve bank does the creating and printing of our fake credit-money

tlewe
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tlewe
June 29, 2012 8:28 pm

You all seem like a smart bunch. What would you tell a 28 yr. old to do with his money? To keep the value of it? thanks

toofuzzy
Member
-1
toofuzzy
September 25, 2013 2:40 pm
Td Ameritrade for instance has 100 Exchange Traded Funds you can trade for free. Out of those pick the Vanguard funds that are 1) large or large value 2)small or small value 3) Foreign (EAFE) 4) REIT (realestate) Invest a percentage equal to your age (28% this year increasing 1 % each year) in a bond fund (use a very short term fund or money market fund till rates peak and their is a first rate CUT, then switch to a long term treasuary fund). Rebalance once / year on the same date to your age in fixed income and… Read more »
Doug C
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August 25, 2016 2:40 pm

math seems off…

SelfMade
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SelfMade
May 18, 2013 2:53 am

To the 28-yr-old and anyone under thirty, I’d advise to buy rental real estate, as much as you can, always with 20% cash down, and hire a property mgr. I started at age 22 with a $3500 investment as a lieutenant in the Army, and bought a house everywhere I was stationed for ten years. I saved thousands in taxes, inflation made my equity more valuable every year, and I retire with enough money to finance my own lifestyle, future medical expectations, and provide for my younger wife who will likely outlive me. And don’t gamble on “guarantees”!

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