As a rule of thumb, life insurance should not be considered an investment at all, since it’s primary purpose is to provide insurance coverage.
That said, some cash value policies have attractive features that can be appealing in certain circumstances.
We will say that a smart investor who has done research and gotten good advice will generally not end up with a permanent cash value life insurance policy.
There are conservative whole life, universal life, and indexed universal life options that may offer competitive rates of return when compared with other very conservative options, such as Treasury Bonds and blue-chip dividend stocks. This will depend, of course, on the age and health of the person acquiring the insurance.
Using a cash value life policy instead of conservative alternatives for the “bond” portion of a portfolio asset allocation could prove beneficial in some cases. It could be, of course, that for a relatively unhealthy person, a permanent life product may be a good way to get a guaranteed rate of return to transfer a tax-free amount to heirs, while the market might not offer such surety in a set amount of time. Then there are the variable life policies that invest in the market while also providing a death benefit.
Overall, life insurance is a costly way to invest in the market and there are much more efficient alternatives. Because of the other costs and fees associated with them, even with tax-deferred growth and tax-free withdrawals, it is a rare situation to find them to be the best option for investment.
There are such situations, however.
Take a healthy young businessman with a high income an few options for tax-deferred investing, for whatever reason; or a healthy young business owner with an option to fund matching contributions and profit-sharing for his employees or to fund a variable life policy.
When compared to taxable alternatives, or to the costs associated with funding retirement for employees as well, there are variable life policies that will provide the most tax-equivalent income to that person in retirement.
Some investors become somewhat obsessive about their portfolio, and it can cause them to lose focus at their own job...
There is guessing, there are screening programs, and there are advisors. As you can imagine, looking at the list of...
Stocks are inherently risky, and an investor has risk of capital loss. As with most things in life, no risk yields no...
The NASDAQ is an electronic marketplace for trading stocks, and is also used to track major Technology stocks
An option is Out Of The Money (OTM) if it isn’t profitable for the option holder to exercise it
A stop-loss order will name a price below (above) the market price on a long (short) position, where a sell order will trigger
Accidental Death Benefits are paid only if the cause of death is deemed to be an accident. There are several exclusions
Investment advice may included recommendations of certain stocks of funds to pick, or when to buy and sell securities
Lifetime Reserve Days are part of the structure of Medicare Part A. After the benefit period, lifetime reserve days are used
The Symmetrical Triangle Top pattern forms when a stock price fails to retest a high or low and forms two trend lines