Giving Murray’s investment visual: “That is death!’
DH = Dear Husband
(Just to let you know, I didn’t write this post to advertise Nick Murray or Investors Group. DH and I attended an IG event at which Murray spoke this past week, and I’m sharing my understanding of his advice as well as the way it is impacting our journey towards debt-freedom and financial freedom. I’m not advertising Dave Ramsey either. His debt-reduction plan is the one we’ve been following for over 3 years, so I make frequent reference to it. But no kick-backs for me in either case.)
Our first financial planning event
DH belongs to a network group of self-employed men and women, and besides meeting once per week, they try to support each other’s businesses. The financial planner in the group, who knows that DH and I are interested in upping our investments soon, invited us to an Investors Group event at which an eminent financial planner was to speak. It would be the first financial planning function that we had ever attended.
We went on Thursday evening, dressed in casual jeans, and were rather surprised to find a room full of people in suits. “Those must be all of the financial planners,” DH surmised. If so, there sure were a lot of them. Most of the audience consisted of people older than we are – late 50s to early 70s and higher – with a few spiffy looking young people interspersed here and there.
The man of the hour, Nick Murray, was indeed impressive, with both the credentials and the powerful presence to command everyone’s respect. He spoke slowly, emphatically, and with dry, dry humour. Generally level and unhurried, he would occasionally belt out a point he wanted to drive home. Here are the 3 basic guiding principles for investing that he presented:
- We have longer life-spans than ever, and they’re getting longer. 50 years ago, retirement was a relatively brief period of time that lasted between the end of a career at age 65 and death at age 72. The average North American today retires at age 62. And the average North American couple retiring today is expected to have at least one in the partnership living until 91. Door #1: Your money will outlive your life. Door #2: You will outlive your money. Set yourself up so that you walk through Door #1.
- There is a very common, very wrong piece of advice floating around out there: As you approach retirement, change your investment portfolio so that it includes more “safe” investments, like bonds, and fewer stocks since they are more prone to the volatility of the market. “This is death!” yelled Murray. And he offered the right piece of advice: Keep your investments in dividend yielding stocks. Why? Because if you go “safe”, you’re essentially going fixed-income, and you’re setting yourself up for poverty in old age as the cost of living keeps going higher and higher through the 3 decades of your retirement. But if you stay invested in stocks, although there will be yearly volatility, there will also be an average growth that consistently outpaces the rising cost of living.
- Don’t panic when the downswings happen. When you hear, “This time, it’s different,” remember it’s not. Historically, and without exception, people stay ahead of the rising cost of living when they have a well-managed, diversified stock portfolio. “Diversification means,” said Murray, “that you’ll never get rich overnight when a company’s stock price suddenly soars. And you’ll never lose your fortune overnight when a company’s stock price suddenly plunges.”
“That is death” visual
Murray’s “That is death!” point was the one point he really wanted to drive home, and he provided a visual to reinforce it. Starting with the left arm bent at the elbow, forearm going straight across his rib cage, parallel with the floor, he said, “This is your fixed income.” Bringing the right arm into play, he placed his elbow at the fingertips of his left hand and brought his right hand up to form a 45 degree angle (as I demonstrate above). “And this is your rising cost of living,” he explained. “That is death!”
My question: Debt-payoff or investment?
During the Question and Answer segment of the evening Thursday night, I braved a question. “If we have debt, would you advise us to lean towards paying it off or towards investing.” Murray responded with grace. “That’s a good question,” he said. “I would say it depends upon the debt. If you have a high interest credit card debt, for heaven’s sake, pay it off. But if you have a low interest mortgage of 3% and your average returns on dividends run around 5 or 6%, it makes more sense to invest – unless having a mortgage is really bothering you.” I wanted to say, “But Dave Ramsey says …” but I didn’t.
Impact upon our situation? Not on the same page
DH and I have been on a journey out of debt for the past 3 and a half years, and we’ve been on the same page in following the steps Dave Ramsey outlines in his book The Total Money Makeover. Having paid off all non-mortgage debt ($102,000), we’re now saving an emergency fund. The next step, according to Ramsey, will be to pay off the mortgage as aggressively as possible while investing 15% of our gross income. Our mortgage is now down to $120,000, and I’m fixed on the goal of having it paid off by June of 2019.
I’m committed to Ramsey’s plan. And having listened to Murray’s advice, I’m in favour of investing in dividend yielding stocks that will help see us through what will hopefully be decades of retirement, despite the rising cost of living. I say “help” see us through because, besides DH already having a small portfolio from his high tech days, we have my teacher’s pension ahead of us. We’ll be pretty well set up with that, but of course we want to be better set up, and of course DH wants to bring new life to his small portfolio.
He’s not so sure about prioritizing the emergency fund now. He’s not so sure about prioritizing the mortgage in a few months. He feels the waste of too little investing when times were good. And the waste of no investing after the high tech bust of the early 2000s. At this point, gainfully employed in his home business for over 6 years, having paid off his business debt, and having attended this IG event, he’s chomping at the bit to invest. Now.
So there it is. Ramsey’s plan has worked wonders for us over the past 3.5 years, and I’m committed to it from this point forward too. DH isn’t. We won’t be making any decisions immediately. We’re in the midst of renovations, and any week now, DH will be doubly swamped with the Christmas rush. But once the dust settles, we’ll be taking action. I’m dreading the possibility of locked horns on this issue. I feel really strongly about staying the course. I’ll keep you posted.
What do you think? Should we keep following Ramsey’s plan? Or should we make investing the priority now? Your comments (and advice) are welcome.