In the far East, they have something they call a Chinese Bamboo tree. The tree takes five years to grow. When the farmers grow it, they have to water and fertilize the ground where the seed is buried every day. A stalk doesn't break through the mud until the fifth year. But once it breaks through the ground within five weeks, it grows ninety feet tall.
Now the question is, does it grow ninety feet tall in 5 weeks or five years? The answer is obvious - it grows 90 feet tall in 5 years because at any time, if for some reason the farmer stopped watering, fertilizing, and nurturing that investment of theirs, that bamboo tree would have died in the ground.
Some farmers stop investing in their trees because they don't see instant results.
After all, it doesn't happen quickly. But no, that's not the right attitude. You got to keep watering the plant.
When I discuss the life insurance numbers with my clients, they often ask me why the ledger shows the negative Internal Rate of Return or IRRs in the policy's beginning years. The truth is in the early years, life insurance companies reserve a higher percentage of the cash value to protect themselves from the Net Amount at Risk.
The Net Amount at Risk is a difference between the policy's Face Amount and the Cash Value that builds up. Yet, the reserved money still accumulates and works for the client's portfolio. In the later years, when the policy's Face Amount and the Cash Value levels up, the Net Amount at Risk reduces to zero.
Zero Net Amount at Risk means lower overall charges. Less onerous charge structure means more cash accumulated, and quickly we get to this point of exponential compounding or the money snowball effect.
Therefore, same as our Chinese Bamboo tree, it takes time and patience. Don't let these early years' negative internal rates of return discourage you. And when it began to happen, and show the results in all its glory, then you'll thank me for showing you the right way to invest. Our team's goal is to advise our clients how to apply strategies to sail into a safe harbor of financial prosperity.
Contact our team at Tesla Wealth to create an easy-to-understand financial analysis specific to your situation. Give us a try and Build Your Legacy With Tesla Wealth Management.
