One of the most important concepts you can learn in business and personal finance is financial arbitrage.
At its core, arbitrage means creating an advantage by using money more efficiently than the average person. It is the ability to place capital in a position where it can do more than one job, produce a better outcome, or create a spread between what your money costs and what your money earns.
Most people only think about money one-dimensionally.They either save it, spend it, or invest it.
But financially sophisticated people learn how to structure money so it can remain accessible, protected, and productive at the same time.
This is where the concept becomes powerful. Life Insurance (Infinite Banking)
The structure is slightly different but the principle is identical:
- Your cash value grows at a guaranteed rate or protected while being indexed (plus dividends in a mutual company or returns from an index such as the S&P 500)
- You borrow against it at a policy loan rate
- The full cash value keeps compounding as if you never touched it
- If your loan investments earn more than the loan costs, you've created a spread and positive arbitrage!
Earn, Protect, & Grow