Why You Shouldn't Contribute to a 401(k) Plan

What I've said may sound like heresy to most people, because it goes against "conventional financial wisdom" (which really isn't wise) and everything you've heard repeated from friends, family and the media.

However - in the next few minutes I'll make the case for why you shouldn't contribute to a 401(k), and you can judge for yourself. Here are the reasons why:

1) A 401(k) is a good savings plan - NOT a good retirement investment plan. Even with matching employer contributions, most plans only offer stocks or mutual funds to invest in. And if the stock market doesn't go up, your account won't either... and you won't have a comfortable nest egg for your retirement. Betting on the stock market to keep going up in these times is far from a sure bet.

2) Most 401(k) plans don't give enough investment choices. Most plans offer a basket of mutual funds to choose from, and I'm not a big fan of mutual funds. Why? Because they have annual fees that whittle away the value of your portfolio over time. And mutual funds only increase in value when the value of the stocks they're invested in go up.

3) 401(k) plans tie up your money until you get to retirement age. In the meantime, you could invest these funds in alternative investments that could provide passive income (and/or capital gains) - such as real estate (bought at a reasonable price/terms), buying or developing a business, or trading stocks, options and/or FOREX accounts.

4) The declining value of the US Dollar means that you'll lose purchasing power with all dollar-denominated assets. If - or more like when - the US Dollar declines further in value, it's a "stealth tax" on your wealth. The only way to hedge against a dollar decline is investing in tangible assets, such as physical gold and silver. Your portfolio will be a sitting duck if its in financial paper assets.

Some 401(k) plans allow investors the option to put their money in whatever profitable investments they want - such as residential/commercial real estate, precious metals and tax lien certificates - and that's good.

I prefer the "Rich Dad" philosophy of Robert Kiyosaki, where you develop one or more businesses or assets that provide recurring passive income that will take care of your in your golden years.

Kiyosaki's latest Yahoo column shows the "Lost Decade" where most investors in stocks didn't make that much on Wall Street-based investments. This is the biggest problem I have with financial media including CNBC - they always tout stocks and promote the stock market. Always telling you when to buy, but almost never when to sell - until its too late and the stock has plunged in value.

This is my two cents - and then some - on 401(k) plans. Leave a comment below whether you agree or disagree, and explain your position.

The 401(k) Hoax, and How You Can Avoid It

Came across a good website and 11-minute video from Garrett Gunderson - author of the book, Killing Sacred Cows.

I recommend it because I'm not a fan of traditional financial planning, mutual funds and 401(k) plans. And I want more Americans to become financially literate, and not keep buying into financial myths that just aren't true.

The reasons why I don't like 401(k) plans are:

1) They offer limited choices for investors - usually several mutual funds, which only increase in value when the stocks these funds are invested in increase in value. If the market crashes (like it did last fall), your portfolio is in trouble. 401(k) and IRA plans came about in the early 1980s; and that's when the bull market in stocks started. These plans made it easy for workers to put money away, and they were sold to Americans as a supposedly safe way to invest in the stock market.

2) Even with employer matches to 401(k)contributions, and assuming employees consistently contribute to their accounts for 35-45 years, there's still a good chance that they'll outlive their money. If someone developed an asset or a business over several years, they could have a source of passive, residual income for retirement, and not have to worry about the stock market going up.

3) Baby Boomers are starting to retire, and pull money out of the stock market. Boomers' buying of stocks and funds were the primary reason for the stock bull market of 1982-2000. When tens of millions of Boomers start selling stocks and funds instead of buying them, the chances of the US stock market going up again are pretty slim.

But the biggest reason why I don't like 401(k) plans is this:

4) People aren't taught how to become skilled investors. I blame Wall Street and the government for this, because I believe they want ignorant, under-educated people blindly buying stock-based financial products.

How can people avoid the 401(k) trap? Get educated. You DO have choices when it comes to investing. You do NOT have to invest in stocks and mutual funds. Look at precious metals, tax lien certificates, or having a professional trade an account for you on a performance-only basis. In other words, he only makes a profit when he makes you money.

If you just have to invest in the stock market, for goodness sakes, get educated. Listen to Phil Grande at www.PhilsGang.com, or Tom O'Brien at www.TFNN.com. They have weekday live radio shows that are saved as podcasts, so you can listen to them at your convenience.

Listen to wise investing advice from Peter Schiff, Jim Rogers and Dr. Marc Faber; check out the weekly webcasts at www.financialsense.com, www.HoweStreet.com, www.GlobalEconomicAnalysis.Blogspot.com, and www.KEReport.com.

CNBC is a good Wall Street marketing show, disguised as investing advice. Don't depend on it for your only source of investing information. That's all for now, get started on your financial education TODAY.

Why Conventional Wisdom Is Hazardous To Your Wealth

I strongly urge you to read the chapters in Robert Kiyosaki's new book: Conspiracy of the Rich. It tells you why:

- Your house really isn't an asset
- Investing in a 401(k) could be the worst way to save for your retirement
- Why it's absolutely critical to invest at least part of your portfolio in gold and silver.

Go to: www.ConspiracyoftheRich.com. If you read it, fully understand it, and take the actions that Robert recommends... it's one of the best financial reads of 2009.

What you're being told in the mainstream and financial media is nothing more than Wall Street cheerleading. Yeah, the stock market has gone up about 2,000 points in the past few months. However, the Dow's still down at least 35% from it's peak of October 2007.

And it's still due for another downward correction. If you have any stocks or mutual funds that you hope will go up even further... don't keep "hoping and holding."

Get 'em sold - pronto. And put some of the proceeds into gold and silver.

Bush's - and now Obama's - insane federal spending has bankrupted our country, and a sharp decline (if not outright collapse) in the US Dollar is coming. And probably sooner than you think.

For you and your family's financial future, go to www.ConspiracyoftheRich.com.

Do it TODAY.

Real Estate & Mortgage Chickens Finally Come Home to Roost

I guess it's better to be 3 years early instead of a day late - which is exactly what I was in calling the real estate/mortgage market bust. My predictions are finally coming to fruition, and we're seeing the start of the Great American Debt Implosion.

Back in 1993 after I graduated college, I was a Kansas farm kid living in suburban Kansas City (Kansas side), in awe of the fancy cars and nice homes a lot of people had. I made the assumption that these folks were rich, but later found out that most folks with lots of 'bling' have it financed.

The past few years I've looked in bewilderment and amusement at how people in Colorado have afforded these McMansions, nice cars and SUVs. The answer - obviously - was/is easy credit. When Greenspan lowered the rates to rock-bottom levels, that was all Americans needed to go on a shopping spree. Instead of 're-trenching' and saving money back in 2001 (which is what usually happens in slow economic times), people just papered over the problems by borrowing more.

In the early to mid-2000s, real estate prices kept on going up and up, and there was this newfound equity folks could extract bundles of cash from - just like having their own magical ATM. But that ATM has gone up in smoke, just like a lot of sub-prime (and now Alt-A) mortgage lenders have.

Even if homeowners didn't use their house for a cash machine, folks in the past few years have definitely bought at the top - and shouldn't expect much (if any) appreciation in the short-to-medium term future. I know two couples who bought homes at a cool quarter million and half million each. They're nice homes, don't get me wrong, but I think they'll come to regret those decisions in the near future.

It's crazy how supposedly-educated Americans are so financially and economically illiterate. They buy into the myth that their home is an asset, real estate is (or was) a 'sure thing' investment, and that levels of government, corporate and personal debt don't matter.

Well, the time that debt matters is right here and right now. The Dow has gotten a 1,000 haircut in just a few weeks, The Fed and other central banks around the world have injected massive amounts of liquidity into the financial system, and Jim Cramer had an on-air meltdown, imploring Ben Bernanke to do something for Wall Street firms to save them from their own stupidity.

Speaking of stupidity, here's a flashback to November of 2006 where the Mad Moneymeister gave the 'all clear' to buy back into homebuilder stocks. The same ones that have lost 15-20% now in August of 2007. It's funny, isn't it, how CNBC and other financial shows almost never tell the investing public to sell - except when the stock has tanked so badly, the only benefit you get is a tax deduction? Like the 80s song, Things that make you go 'hmmmmmm...

For even more stupidity, here's an article trying to spin recent home sale news in a positive light. They're saying "Even though the number of sales have gone down, the average price of homes has gone up. That's why we're bullish on real estate." Note to idiots: The reason the average price has gone up is because the number of homes sold has gone down. The higher priced homes will skew that average up - it's a simple freaking concept! That's basic math 101, but maybe your classes were different in the public school you went to.

If the real estate correction were a baseball game, I'd say we're only in the 2nd or 3rd inning. We've got a long ways to go, especially with the Fed increasing money supply at crazy rates, plus oil and gas prices staying high. I don't know when the bottom will be, but I think it'll be at least a few years - maybe a decade or so - before real estate will come back.

This has been the mother of all debt parties, and the hangover will be a doozy. Prudent folks will keep their debt levels and expenses as low as possible, and keep at least a portion of their portfolio in precious metals. Normally cash is king in declining stock and real estate markets, but not when monetary inflation is around 10%/year. Even if you get 5-6% interest on your money, you're still losing 4-5% in real (inflation-adjusted) terms.

I'd highly recommend you get financially and economically literate if you haven't yet - or find someone who is and heed their counsel. Start by reading the book Rich Dad, Poor Dad by Robert Kiyosaki, and Why We Want You to Be Rich by Kioysaki and Donald Trump. You may not like The Donald, but he has a very good understanding of what's going on in America and around the world - and how prudent Americans should prepare for a very different future.

A friend of mine I had lunch with was worried about what's happening in the markets and the economy. But if you're financially and economically literate, you should be ecstatic. That's because some great opportunities will reveal themselves to wise investors. You can take advantage of these opportunities honestly and ethically, and make a boatload of money in the process.