By BOB CUNNINGHAM
As I write this weekly entry, the Dow Jones is coming off a gain of more than 200 points. Despite predictions of impending doom by some, and the realistic acknowledgement from even the most optimistic of investors that the markets won’t go up forever, they continue their improbable ascent.
It’s a lot like late 2006 and most of 2007, when we hit record highs according to all the major benchmarks… right before falling to Earth like a rocket in 2008, reducing many account balances by almost half in a matter of months, even weeks.
So why am I not concerned about the inevitable decline? What puts me in a position of being so confident? Simple… I’m flat broke and, thus, have nothing to lose.
LOL… JUST KIDDING. How I crack myself up. Truth is, while my wife and I are far from being considered wealthy, we have some decent retirement savings… we’re doing OK.
And the really cool thing is that our funds aren’t invested in the markets.
“But Bob, you’re missing out on some of the greatest profits ever!”
That’s true. And we’re perfectly fine with that. Our nest-egg is invested in dividend-paying whole life insurance, which gives us a steady and predictable gain… with NO chance of loss.
None. Nada. Zilch.
Look, friends, unless you’re brand new as a reader on this site, you’ve read here before about how losses annihilate an account more significantly than the same rate of gain helps. I’ve demonstrated how average annual rate of return is a fallacy. Go up 25% one year, go down 25% the next… and instead of being even, you’re actually down 12.5%. Reverse the order – down the first year, then up the second – and you’re STILL down 12.5% after the second year.
Doesn’t seem fair, does it?
And while it is absolutely true that we are missing out on some pretty sweet gains right now, it is without question that we will be better off over the long run than those who insist on riding the roller coaster. History says so… and I’m not willing to buck a trend lasting more than 140 years.
“Okay, but hasn’t the S&P 500 averaged about a 10% return all-time? That’s what I always read.”
Again, that’s a bogus average – taking all the returns and adding them up (since after The Great Depression, I believe), subtracting the losses, and dividing by the total number of years. The effective return, according to Morningstar.com, was slightly better than 3%. The effective return is how much your money would have actually grown. Dividend-paying whole life insurance returns between 4% and 5.5% (depending on dividends) EVERY YEAR, and is tax-free when the money is correctly acquired via withdrawals of principal and dividends and/or non-qualifying policy loans.
It’s truly great having a fairly specific idea of how much money you will have at any given time in the future.
“If this is true, why doesn’t everyone use dividend-paying whole life insurance, and get the heck out of the stock market altogether?”
Many would if they knew about it. And more and more people are going that route, thanks to the strategy getting more publicity from sources such as this blog. Still, the same conventional drivel of favoring 401Ks, IRAs, etc. continues to be perpetuated by Wall Street, many personal finance gurus, and our federal government. It’s a constant battle.
The purpose of this blog is to educate folks… primarily, younger adults and families… that there is a much better way than conventional retirement savings vehicles. The key is starting NOW. This superior approach offers more safety, liquidity, a steady rate of return, tax benefits, and a living benefit that allows for self-financing of major purchases and other handy uses that you simply can’t get from traditional savings and investments.
And I’ll continue to plug these in this space and others. Slowly, the tide will turn in favor of Americans who, like myself, want to retain complete control of their finances at all times.
As always, thank you for reading.
DISCLAIMER: This post represents the author’s opinions only. In no way should any part of the content of this post be interpreted as official financial advice, nor does it represent an intention to solicit readers into a specific company or investment. Results are never guaranteed. Utilize the information as you see fit, make all money decisions at your own risk.