Don't Compare to the S&P

@evanburnside12
What's the difference between 2015 (when this graph was generated) and more recent years?

Nothing it is has been about 150 bp since the 1960s when middle class investors started jumping into mutual funds. It has been going down if anything.

People lose A LOT of money in crashes.

And they get a lot of money in booms. Stocks are volatile.

If people can't stomach 30-50% corrections then they shouldn't be in the market. People should be expecting it. Instead all they are told is 12%. People are lied to about markets.

I don't know anyone who is advised that the stock market is placid. Virtually all the education talks about ups and downs in the market.
 
@evanburnside12 Teach your clients not to panic when the market drops and show them how it's bounced back and higher every time and they won't get these poor returns. If your investors are only getting those poor returns it's because they are switching to low return ”safe” assets when there is a dip, or they are chasing each new fund that performed best last year instead of just staying with the market. These are simple finance 101 concepts and maybe you should take a free finance class online or go down to your community college.
 
@evanburnside12 Indexing to the market is a terrible strategy when looking to build long-term wealth. Several reasons:
1. Indexing to the market is not the same as being in the market.
2. Indexing to the S&P doesn't give you the benefit of the dividends. Guess how much of the S&P performance is due to reinvestment of dividends? 40%.
3. Indexing doesn't let you take full advantage of dollar cost averaging. DCA is an awesome way to make the market volatility work for you.
4. You don't have to be led into an iul policy to have safety in your portfolio.
5. Buying an index fund or etf does allow you to receive the dividends.
6. Most IUL/VUL are sold as level death benefit. Which means that the accumulated value is not added to the death benefit. With a lower cost term policy and separate investment, beneficiary would receive BOTH the death benefit and separate investment.
 
@evanburnside12 In my prospective, every financial vehicle has its own place in one portfolio based on many considerations like, purpose, liquidity, risk, return, taxes and time horizon..
 
@mamushame I'm not saying that no one should invest in the stock market. I'm just saying that telling everyone to expect 12% is nonsense. Comparing 12% to the 4-5% of WLI is a fraudulent comparison.
 
@evanburnside12 You don't need to denigrate the stock market to advocate purchasing life insurance.

It makes absolute sense to have both for many people, using the life insurance allocation as an alternative to bonds.

Anyone saving for retirement and not investing in equities is a fool. My brokerage accounts have nearly tripled in the last 10 years. Even in a period like 2000-2010, if you're consistently putting money into equities (like you would paying your life premiums) then you came out way ahead.

Ramsey is crazy with that 12% number (the actual number is more like 10.5) but largely because of the way he pitches it (it's not a flat line, it's violently up and down).

If you don't keep pace with the market with a large pecentage of your assets, you're going to end up never retiring (or at least having a very poor retirement).
 
@evanburnside12 What would you consider a time frame to look at as a comparison? 1 year? 3 years? 5? 10? 20? 30-35?

Because while yes the market is “risky” (that is a lazy explanation really). It still continues to perform. And your explanation is an oversimplification really. Cause while overall, no the market as a whole does not average 12% there are many places that have also. So it’s disingenuous to say both ways honestly.
 
@evanburnside12 Decades was the worst answer you can pick, there are many funds that average over 12% over decades. Heck AGTHX has averaged 13.7% over decades.

And the average investor doesn’t reap those rewards, not that the market doesn’t. They don’t because they are emotional and get scared, or pull out in down markets. Many investors that are included in that study are uneducated self-directed investors. Not all numbers and facts are the true story to everything you look at. It even says in the article you linked. “Too many investors stop investing when the market is down and/or try to time the market”. This isn’t a problem of the market. It’s the problem of uneducated investors.
 
@resjudicata
Decades was the worst answer you can pick, there are many funds that average over 12% over decades. Heck AGTHX has averaged 13.7% over decades.

Most investors don't make this. You're again falling for survivorship bias and not accounting for investor behavior.

Not all numbers and facts are the true story to everything you look at.

Yeah and 12% is straight up fantasy.
 
@evanburnside12 You completely cherry picked even the articles you linked. Did you even read the entirety of my response. None of what you are spouting is the problem of the market. It’s the problem of the investor. These are the same people that stop when the market goes down, are the ones that stop paying their premiums on a WL when the market goes down also. WL has the highest default rate being cancelled during these same times.

You are really showing your ignorance really. The S&P 500 is a tracking the top 500 in capitalization. Capitalization is the sum of long-term debt (bond securities) and equity securities. If a company performs poorly it capitalization drops disqualifying it from the index. When it disqualifies for the index meaning it no longer is a top 500 on capitalization, then another company has now become one of the top 500 in capitalization meaning it must replace it according to their filing with the SEC under the Securities Act of 1933. It’s not survivorship bias. It’s contractual structuring honestly.

And I just gave you an example that is/has done over 12%. Do you want more? I can give a big list.
 
@evanburnside12 Not an educated investor. I am excited when I see my account decline by 30%. I’m purchasing more shares at a 30% discount. Hallelujah.

And no. They are canceling because the economy is down. They are feeling the pressure and cancelling their high premium life insurance. Not because they are chasing the market. They aren’t investing. So you think they’re cancelling to invest which they aren’t doing anyway? Yeah ok, keep lying to yourself. Like you said, you have to deal with real life individuals here. They are cancelling in general because they don’t want to pay the high premiums.

You really are sounding like a WL agent that lost their client and thinking you are gonna get group think everyone agreeing with you to make you feel better. You have a specific client in mind that left you because they feel like buy term and invest is a better plan for them don’t you?
 
@resjudicata
I am excited when I see my account decline by 30%. I’m purchasing more shares at a 30% discount.

If you're going to discount how the typical person behaves then it's not worth having the discussion. This is people's retirement. They're going to be affected by a 30% decline.

They are cancelling in general because they don’t want to pay the high premiums.

They're canceling because they think they're getting a poor return for that money because people like Dave Ramsey say they should be getting 12%. They're selling because they're being lied to.

You really are sounding like a WL agent that lost their client and thinking you are gonna get group think everyone agreeing with you to make you feel better. You have a specific client in mind that left you because they feel like buy term and invest is a better plan for them don’t you?

You know nothing and are spectacularly wrong.
 
@evanburnside12 I am the typical person. I am a person. So you can’t discount me either than you very much.

And if you are going to just make assumptions on why people cancel then it’s not worth having the conversation.

And I know a lot more than you. You talk about fees being taken out. All returns must include fees and taxes (if taken out from selling of shares to pay the taxes). If they are not then the client is paying taxes out of pocket which then as nothing to do with the balance sheet or returns of the portfolios. So those returns are after the balance sheet of assets minus liabilities. So your assumptions of these returns are all wrong. Categorically and factually wrong.
 
@evanburnside12 I think asset allocation is the biggest factor. Not many investors stay with a 100% Equity portfolio, as they get older they add fixed income. An academic study reviewed a comparison between the stock market and an IUL. The study concluded the stock market outperformed the IUL but Risk vs Return was better for the IUL. This study also assumed your average person stays 100% in the market. I’ve seen this strategy back fire when an investor is close to reaching their end time hitting a market correction and losing 20-30 in their final years.
 

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