A 349-Year-Old French Gambling System That Can Help You Live Debt Free…?
If you’ve followed Money Morning over the last few weeks, you’ll know Kris has warned you about the government helping itself to your retirement savings. Taking your money directly to invest in pet projects…
Or coercing funds to invest a certain percentage of your retirement savings in these projects by law…
Maybe you thought he was nuts. Maybe you thought he was bang on the money. Maybe you thought he was joking.
But no matter what you think, what if he’s right?
What if the government really is going to rip your retirement savings away from you? What will you do?
Blaise Pascal – the 17th century French mathematician, philosopher and physicist – once said, ‘Only a fool would bet against God’. And we’d argue, only a fool would bet against the government interfering with your life – and your money – too.
Here’s the system Pascal came up with to make sure he’d ‘win’… and it’s one you can follow to a debt-free retirement too.
Pascal reasoned: Maybe God exists. Maybe He doesn’t. If I don’t spend an hour a week at church, I might get stuck in Hell for eternity. But if I just sacrifice one hour to go to church a week, I could get into Heaven. And I also get to sing songs. And socialise. And hear the weekly gossip. I have everything to gain and nothing to lose!
Now there are plenty of arguments against this philosophy. We won’t go into them here…
What we want you to focus on is the win-win logic behind the argument. And how you can use it live debt free in retirement…
Wouldn’t it make sense for you to make your own ‘Pascal’s Wager’ for retirement now… That is, put yourself in a spot where you have everything to gain in retirement and nothing to lose?
Take a look at our own betting matrix…
As you can see, if you believe Kris when he says your retirement savings are under threat… and prepare… it’s heads you win, tails you win even more!
All you have to do is prepare for your retirement as if you believe your retirement savings are under threat. That way, whether they are or not, you’ll come out a winner.
Now there are a number of strategies you could use. Unless you’re prepared to put dollars on the line… to take some risks… you’ve got virtually no chance of maintaining or improving your standard of living.
Remember, Pascal had to put in the time at church if he wanted to get to Heaven.
Here’s one method Kris believes you could for your own Pascal’s Wager…
Use the magic of compounding… Buy no more than a handful of reliable blue-chip stocks that pay a regular dividend.
These should be stocks you’re prepared to hold through thick and thin… and they should be good enough that you could think about taking part in the dividend reinvestment plans (DRPs) to compound your returns.
A DRP gives you the choice to get extra shares instead of a cash dividend.
But it’s better than it sounds!
Because when the next dividend is due, you’ll earn a dividend from your original shares AND you’ll get a dividend from your new shares too.
Every dividend payment date, you get more shares in the company… without having to pay commission to a broker.
It means that five years from now, your shareholding could increase by 50%… and 10 years from now, your shareholding could have more than doubled.
Here’s how it works:
Imagine that in 2011 you buy 1,000 shares in XYZ SHARES at $1.74 each = $1,740
By 2016, thanks to reinvested dividends, you now own 1,507 shares. If we assume the share price has risen to $2.04, your shares are worth $3,074. If you hadn’t reinvested the dividends your shares would only be worth $2,040.
Roll forward another five years, and by 2021 you could own 2,329 shares. And assuming the share price has climbed to $2.34, your investment would be worth $5,448 (2,329 x $2.34).
In other words, your initial one thousand shares have compounded to be worth more than three times your initial stake.
That’s the power and magic of compounding returns.
And that’s just with 1,000 shares.
If you can afford 5,000 shares today, for a total investment of $8,700, you’re looking at turning it into $27,244 in 10 years. By which time, if you’re ready to retire, you can start collecting cheques of over $2,500.
Getting access to the DRP is easy. You simply buy shares in a company that offers this plan and then fill in the form.
Aaron Tyrrell
Editor, Money Morning
P.S. This is just ONE of the investment ideas Kris Sayce has shared with readers of Australian Small-Cap Investigator this year. Feel free to use it to help you make money for the future from this market.
To find out more about Kris’s latest money-making ideas – and how they can help you place your own Pascal’s Wager for retirement – please click here…
Aaron Tyrrell
Editor, Money Morning
November 19th, 2011 at 11:19 am
Mmmm
You can make that argument with pretty much anything.
You can reinvest interest in a term deposit. Or better yet reinvest rent from a house into the mortgage.
So what you’re really saying is take a punt on safe blue chips.
Problem there is that blue chips operate in well established mature markets that can only grow from increasing market share or through general inflation (credit expansion). All the while paying little dividends (on balance… Although some pay good dividends because they can use the cash to grow… in mature mkts).
Looking at the past 5 years blue chips haven’t done much. So if you think credit expansion will reemerged then why not take a safe punt on housing.
I mean blue chip housing. Not spruiked up QLD housing.
Sure house prices meander but only crash when unemployment spikes.
Ps I’m invested in gold and silver. One asset class doesn’t preclude the other.
I think at the moment (especially) the share market is for trading.
November 19th, 2011 at 11:35 am
I meant …”Although some pay good dividends because they CAN’T use the money to grow”
November 19th, 2011 at 1:59 pm
Of course the worst thing is to reinvest your dividends into shares then have the company collapse. You’ve lost ALL that money now from not taking out dividends when the going was good.
Its just a casino run by the Govt…
Speaking of collapsing companies, does anyone know what plans the Govt has to sort out one of the big banks collapsing?? Do we find our accounts frozen one morning and wait a week to have it reopen with a 30% haircut?? or are they going to continue to guarantee Mom & Pop depositors? I see NZ is working on it now.
November 19th, 2011 at 6:57 pm
I think the philosophical questions are more fun.
Do pedophile priests go to heaven? What about mass murderers who “find God” just before they are electrocuted?
If those groups get into heaven and people who don’t believe in God (but live moral lives) go to hell, then I don’t want to be in heaven!!!
Where do politicians, central bankers and financial journalists go when they die?
November 21st, 2011 at 11:15 am
For DM @4 For the best answer you should read the bible.