You bash the guy for saying a 6% return is conservative and then proceed to use a completely unrealistic model to prove a point. I'm not arguing for either model, but how many times has the market (a balanced portfolio) lost 50% in a given year let alone twice in a 4 year period?
Any Experience with Bank On Yourself or Infinite Banking?
- Thread starter ShawnBrooks
- Start date
You bash the guy for saying a 6% return is conservative and then proceed to use a completely unrealistic model to prove a point. I'm not arguing for either model, but how many times has the market (a balanced portfolio) lost 50% in a given year let alone twice in a 4 year period?
BTITD and BOY can exist together...clients have different needs. I use that site a lot...glad that you found it useful.
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My glass half full response: two out of three 100% return years...still waiting for that one.
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My example is simply to illustrate the point. I wasn't saying that a 100% annual return is realistic or going to happen. It just illustrates the point.
I've seen agents illustrating IULs, in particular, based on average S&P performance, but when you look at the actual dollars, it's a different story, especially factoring COI and expenses, etc.
That's all I'm saying.
And for the record, I sell Guardian WL and I sell term. There is no magic bullet. But I have seen it where it's "buy term and blow the rest on a boat." Part of the "difference" is that it's unknown because WL and term and completely different animals, so comparing apples to apples is nearly impossible because they serve very different purposes.
I wasn't ripping the OP, I was making the point that historical averages are a poor way to illustrate the potential performance of a product. Then again, the WL I sell has guarantees + dividends which makes it a whole lot easier than running it up against an index with caps, floors and participation rates. Having a dividend history, along with guarantees, is going to produce far more accurate illustration than an index.
YMMV
I've seen agents illustrating IULs, in particular, based on average S&P performance, but when you look at the actual dollars, it's a different story, especially factoring COI and expenses, etc.
That's all I'm saying.
And for the record, I sell Guardian WL and I sell term. There is no magic bullet. But I have seen it where it's "buy term and blow the rest on a boat." Part of the "difference" is that it's unknown because WL and term and completely different animals, so comparing apples to apples is nearly impossible because they serve very different purposes.
I wasn't ripping the OP, I was making the point that historical averages are a poor way to illustrate the potential performance of a product. Then again, the WL I sell has guarantees + dividends which makes it a whole lot easier than running it up against an index with caps, floors and participation rates. Having a dividend history, along with guarantees, is going to produce far more accurate illustration than an index.
YMMV
Very good concept but you need to find a company that specialize in BOY and Infinite banking. For it to be effective fully, you cant just write any dividend paying whole life policy.
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Your post shows that you don't really understand market trends and historical rates of return. That's ok, you're an insurance agent, not an economist or investment banker. As for my 'very conservative 6%' it is just that, conservative. From 1933 to 2012 the return on the market (adjusted for inflation) was just under 9%.
Please don't try to sell your clients on the idea that WL with PUA is going to be a better long term investment than a good, well diversified mutual fund. Because if you are doing that, then you are lying to your client. History show us that the market is very resilient and provides substantial growth over the long term.
Not only that, but you still have a large risk exposure with WL insurance. You are gambling your money on one company. What if that company becomes insolvent? With a well diversified mutual fund you are spreading your risk out among a hundred or even a thousand different companies, doesn't that sound a little safer than one single company?
If someone wants to buy WL because they do not want to be exposed to the volatility of the market, then that's fine. I have no problem with that. Different types of risk are suited for different types of individuals.
I just ran an illustration on myself... This is a WL with PUA, face amount is $150K. Annual premium is $2400.
With the WL at year 35 the face amount has grown to 316K and the CV is 151K.
Had I taken that same $2400 per year and invested in that 'conservative 6%' my balance at year 35 would be $286K.
I would love for someone to tell me why I'm wrong. (that sounds sarcastic, but I really don't mean for it to be) I truly I want to get more excited about WL insurance.
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You're wrong.
Ok, I bet you want an explanation. Here is why you are wrong. Investors are human, they make human mistakes. Ask yourself this, why did money go flooding out of the market in 2008/2009? Why did people think 2009 and 2010 were bad years in the market?
Oh, and mutual funds are managed by humans as well, they tend to be subject to the same problems. Even index funds have bias, after all, someone has to choose the stocks for the index.
Again, I'm not saying BOY is perfect. I looked at LEAP and COW, I preferred COW for its simplicity and I think it was a bit more lawsuit resistant. LEAP taken to its inevitable conclusion would call for taking the equity out of your home to put in insurance. Right or wrong, that is a lawsuit waiting to happen.
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Not really sure what I'm wrong about. 2008 the market was down. That's how it goes, the market is up, then down, then up, then down. But overall it is up more than its down. It gains more than it loses in the long run. That's what keeps the economy turning.
- 15,041
You missed the point. It is ok, everyone does and that is why investors never get average returns.
Why did the market go down? People were busy selling. They were locking in their losses. Why did the market go up, they were busy buying.
The average investor has shown time and time their desire to buy high and sell low. That is why the market can return whatever it wants, the average investor will never see it. The market may have averaged 9%, but most investors didn't.
This has been proven time and time again.
Now, I'm not going to research this for you, as I don't care if you do BOY, BTID, or JOAB. I'm not here to convert anyone's investment philosophy. As I told the OP in the beginning, BOY or Infinite Banking can work for you, just don't believe it doesn't have flaws.
I'm personally more in favor of some diversification. Max out your IRA or 401k and buy some CV life insurance.
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Okay, I think I understand what you're saying. Many investors miss out on the overall increase of the market because they are short term investors trying to take advantage of ups and downs, rather than being in it for the long haul?
I agree with you on that. That's why I said its not one size fits all. What is right for one, isn't right for another. If you are not a principled, patient, persistent investor then the stock market isn't for you. Those who make the most are the ones who stick with it. For those folks scared of the volatility, WL may be an alternative they are interested in.
My point was that if you are comparing apples to apples. $500 a month in a WL policy for 35 years vs $500 a month in the stock market for 35 years, the market wins.
- 15,041
You still missing the point.
It isn't about people looking for short term gains. It is about human nature. The market goes down, they get scared and pull out, the market goes up they get greedy and invest. Just watch the flows into stock funds versus bond funds. It is almost always contrary to what people should be doing.
No one is going to put $500/mo into mutual funds and get market returns. Human nature will kick in and side-track the plan. Of course, putting $500/mo into a WL policy can be side-tracked just as easily.
It isn't about people looking for short term gains. It is about human nature. The market goes down, they get scared and pull out, the market goes up they get greedy and invest. Just watch the flows into stock funds versus bond funds. It is almost always contrary to what people should be doing.
No one is going to put $500/mo into mutual funds and get market returns. Human nature will kick in and side-track the plan. Of course, putting $500/mo into a WL policy can be side-tracked just as easily.
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