You Wouldn’t Make a Major Purchase Without a Guarantee, Would You?

When you make a major purchase, you want to make sure the product you purchase is backed up by a good, solid guarantee.  In fact, you most likely would pay more to secure such a guarantee.  And that is because you simply can’t risk purchasing a lemon and having no recourse if something goes wrong.  Good solid guarantees assure you that the company or manufacturer stands behind their product and how it performs. That is important to you as the consumer.

But here is an ironic fact that puzzles me.  Many people continue to purchase products, pay for services, or invest in things that have a guarantee of zero, or slightly better than that, they have a minimal guarantee.  Unfortunately, this is based on the unrealistic belief that the gains you make just might outweigh the losses you will suffer.

Examine the facts:

• A 5% guaranteed annual growth rate on a $1,000 annual contribution will outperform a $500 annual contribution earning double that 5% annual growth rate for over 24 years.

Your problem lies in consistently finding out how to earn that 10% rate of return because realistically it’s not very probable.  Yes, you may earn 10% or higher sporadically, but you will also have to average in the years where you earn nothing or even suffer a loss.  And so, over a 10-year window of time, 2.6% is the average annual return that you will most probably experience, if you invest in equities and fixed-income mutual funds.  Over a 30-year window your return drops to a mere 1.9%.  Interestingly, for those of you who depend solely on fixed-income funds, your earnings are, on average, 0.6% over a 10-year window and a mere 0.7% for a 30-year window.[i] 

Naturally, you need to know what the average looks like.  The average is, “The universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. This universe includes both small and large investors as well as professionally advised and self-advised investors.”[ii]

Candidly, securing a lower guaranteed rate of return and boosting your savings will provide you with the results you are expecting more dependably than pursuing higher returns in lieu of good savings habits.  And you must secure strong reliable guarantees for the money that you do keep, because those guarantees will safeguard you from recourse in the future.

Time and time again, Participating Whole Life Insurance has proven to be the product that can provide those secure, strong, reliable guarantees that millions have depended upon for both growth and protection.  Unlike Universal Life insurance products that provide zero to minimal guarantees, Participating Whole Life products provide high guarantees and have a high sustainability rate.  That is something you need.

Because of these solid guarantees that provide you the steady growth you can depend upon, you can be assured of safely increasing the amount of money you place into Participating Whole Life Insurance policies for safe keeping.   Not only will this prevent you from exposing yourself to the risks associated with seeking the higher rates of return that occur sporadically in equities, fixed-income funds or even Universal Life Insurance products, it also will secure higher guaranteed growth rates for you, compared to the zero to minimal guarantees found in Universal Life Insurance contracts.

Savings is more important for your financial future than pursuing a higher rate of return.  But when you can earn a guaranteed higher rate of return and eliminate the risk associated with it, then it is only logical to take advantage of that guarantee.

Protecting what you have earned and saved is critical because a loss will force you to earn more with less just in order for you to break even.  For example, in a portfolio of $100,000 if you suffer a

• 20% loss you will be forced to earn 25% with the remaining $80,000 to break even.
• 30% loss you will be forced to earn 43% with the remaining $70,000 to break even.
• 40% loss you will be forced to earn 67% with the remaining $60,000 to break even.
• Etc.

These facts are some of the reasons why the average investor only earns 2.6% over a 10-year window or 1.9% over a 30-year window, and that doesn’t even keep up with the cost of inflation.  So, if you don’t make major purchases without good solid guarantees, then don’t waste your time thinking about purchasing a financial product that doesn’t have a good solid guarantee like Participating Whole Life Insurance.

[i] https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/#38314b2b111a
[ii] Ibid