Other Investment Alternatives

The other day I was talking with a mutual fund manager representative about their mutual fund they were promoting. I asked what direction they were going to insure they would be able to achieve their mutual fund investment objective. After a few minutes of asking me what I was referring to, I just asked “is there any chance you could project a positive gain over the next few years”, his response was “we are going to try”.


As I thought about his answer, I wondered if my clients would be satisfied with that same answer; I will try.

I was reading an article about mutual fund managers last week and the article pointed out how little mutual fund managers had of their own money invested in the mutual fund they managed. As I read on, of the mutual fund managers surveyed the average of the money that managers had in their funds was about 1%. I thought that number was very low.

I did some calculations on my computer and found that some of the same financial instruments we used 20 to 30 years ago seemed to make sense more and more especially in the lost decade.

So I looked at John Doe age 25 investing $2029 per year in an investment. Why $2029? Just stay with me. Investing that amount over the next 40 years in a paid up dividend whole life insurance policy would produce, under the current dividend scale, $245,906 of cash or a return of 5.01%. A number that far exceeds the return of the S%P 500 for the 3, 5, 7 and 10 year averages. As well as outperforming the lost decade of the 2000’s. That annual premium would produce a $100,000 death benefit in year one. And a death benefit of:

10 year - $152,069

20 year - $228,502

30 year - $326,953

40 year - $456,955

And at age 66, the policy would produce an income of $18,000 per year for the next 15 years while maintaining a death benefit at 3 times the original death benefit. While not a lot of income, John didn’t invest a lot of his money.

What a great leverage vehicle with guarantees and certainty.

How much of a guarantee or certainty do you have with your future or personal financial planning?