OT: Stock market investing

[Hanmudog]

no, don't do this. Buy term life if you need it (if you're single you don't need it, if you're married with no kids you may or may not need it) and invest the difference in premiums yourself. Also, buy disabilityinsurance whether you're single or married. Get one with a "your profession" definition of disability. Otherwise if you can still do any job you're not considered disabled even though you may not be able to earn anywhere near what you did before.

Two thingspat:

1. A whole life policy can be used as a retirement vehicle thatgrows tax free at a rateof around 5-6%. I know because I have one. However, I would not advise getting one if you have not fully funded your other retirement options (ie IRA, Roth, etc.) or if you don't have dependants.

2. If you have a family then you can get a million dollar term lifepolicy for around $70-$80 month which is a hell of alot more money when you die than investing it in stocks like someone said earlier.

Disclaimer: I do not sell insurance or have any remote relationship with the business.

 

[saltslugs]

<span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">"2. If you have a family then you can get a million dollar term lifepolicy for around $70-$80 month which is a hell of alot more money when you die than investing it in stocks like someone said earlier."<br style="min-width: 0px; "></span>

<div><span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">
</span></div><div><span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">The S&P and Dow have grown an average of 11% per year between 1960-2010 (including the recent recession), which seems like a typical length to be paying life insurance (start at age 25, die at 75). Investing $75 per month, starting in 1960, during that stretch would yield a payoff of $1,152,000 in 2010.</span></div><div><span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">
</span></div><div><span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">The real payoff of life insurance is if you die early. But, living a very long time and paying for life insurance is basically a financial disaster. For example, paying $75 a month for 60 years would yield a payoff of over $3 million. </span></div><div><span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">
</span></div><div><span class="Apple-style-span" style="font-family: Tahoma, Verdana, sans-serif; font-size: 12px; background-color: rgb(255, 255, 255); ">Source: My lame-*** with a spread sheet and</span>http://www.moneychimp.com/features/market_cagr.htm</div>

 

[jackstefano]

I've been in the market for 10 years, and my attitude is that I will always be in the market heavily until I get older and it's time to diversify. However, I would point out that your historical analysis ignores the fact that net market gains, as a whole, since the bubble burst in the late '90's haven't been very good. Hell, my net since exactly 4 years ago is negative. I stay in though.<div>
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</div><div>ETA: Obviously, like everyone else, I doubled my money between 3/09 and earlier this year, but I lost half from 9/08 to 3/09.
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[Ridgeland Dog]

It is a safe long term investment and you get to enjoy it.

 

[saltslugs]

that over the long run stocks perform very well. It doesn't ignore the market crash at all... that period was included. I got super lucky and first got in to the market in 5/09.

 

[boomboommsu]

"There will always be long-run real gains to be had in the stock market unless our country totally falls apart"

Nope. you are expecting the past to repeat itself, when the post WW2 period was an exception, not the rule. i expect the last ten years to repeat themselves: zero growth. you can make money if you buy low, but that is NOT now. that was 7500. now, we're near the peak.

Future economic performace is already priced in, and WS is way over-estimating future performance. for the most part anyway. WS expects to make their profits and turn over the money continuously to keep making more money, kind of like a pawn shop. so there is some money to be made in buy and hold long, since stocks with quick smallgains are much more profitable to them than stocks with large, slow gains. But at the same time WS is incentivized to overpay, from too-low tax rates and unregulated HF trading that lets them dump shares before they really realize losses even when prices drop, so all stocks are overpriced. that's fine if you can sell at an overpriced price, but that will never happen with a hold-long strategy, because the global banking system will either be regulated down or blow itself up. stable, unregulatedfinance has never happened in all of history. now is not divinely-ordained to be different.

anyway, WS expects the EU situation to be fine, and stocks are priced accordingly. I put the odds at better than not that the whole thing falls apart. and there's no reason to risk a 50% loss that's even one-tenth as likely, for single digit gains.</p>

 

[RonnyAtmosphere]

.. investments in those 2 items are merely responsible for a worldwide economic crash that the planet has yet to recover from.

Maybe you'll have better luck.

 

[Hanmudog]

<span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">"2. If you have a family then you can get a million dollar term lifepolicy for around $70-$80 month which is a hell of alot more money when you die than investing it in stocks like someone said earlier."<br style="min-width: 0px;"></span>

<div><span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">
</span></div><div><span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">The S&P and Dow have grown an average of 11% per year between 1960-2010 (including the recent recession), which seems like a typical length to be paying life insurance (start at age 25, die at 75). Investing $75 per month, starting in 1960, during that stretch would yield a payoff of $1,152,000 in 2010.</span></div><div><span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">
</span></div><div><span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">The real payoff of life insurance is if you die early. But, living a very long time and paying for life insurance is basically a financial disaster. For example, paying $75 a month for 60 years would yield a payoff of over $3 million. </span></div><div><span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">
</span></div><div><span class="Apple-style-span" style="font-family: Tahoma,Verdana,sans-serif; font-size: 12px; background-color: rgb(255, 255, 255);">Source: My lame-*** with a spread sheet and</span>http://www.moneychimp.com/features/market_cagr.htm

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Your numbers probably are correct but the point of life insurance is to cover your family in the event of an early death. If you get diagnosed with terminal cancer then it is too late to get a policy and your family will never get the benefit of that long term investment. Hell if I knew for a fact that I was going to live to be 75 then I would not buy it all but as they say "**** happens".

 

[dawgnautique]

policy as well for the reasons stated above.....when you truly look at it from the tax advantages...you cannot go wrong. I use it as just one of my tools....I also have mutual funds, equity indexed annuities and some "play money" that I seem to like to lose a lot of on my etrade account. The use of the loaning money back to yourself at retirement which does not trigger a taxable event is just too good to pass up....the key to true retirement planning is having a very clear and logical way of withdrawing your money and still keeping all (or almost all of it) ie. not paying taxes on it. With everything that I have invested, with the exception of the mutual funds which continue to sink/fly/sink/fly and still stay about the same level, I am guaranteed to not lose any of my principal no matter what happens to the market (barring the complete failure of about 5 different major insurance companies which will probably be the total collapse of our entire economic market/dollar).....<div>
</div><div>Some of you need to quit being so naive and wake up to the fact that Dave Ramsey is now a multimillionaire because he is selling his views/techniques to thousands and though they are good techniques...they are not the absolute "Right way" for everybody. Staying out of debt is absolutely key and is vital to anyone's financial success but don't believe he is the end all/be all to all ways of investing. He is making hismoney by selling books, programs and tickets to "live events," not by just buying term and investing the difference.</div>

 

[saltslugs]

And that is definitely a valid point. But, living a long time also happens. Life insurance is, on average, quite inferior to investing in stocks. But, your point is definitely legit. Still, if you're making a decent living and saving money along the way, you shouldn't need life insurance.

 

[saltslugs]

Post means after. Here's a graph of the DJIA from 1900 to the presenst: http://stockcharts.com/freecharts/historical/djia1900.html. I don't understand what you mean when you say the post-WWII period. Stock prices have been rising consistenly since the great depression, with only a minor slowdown in the last 10 years (the slowdown is exaggerated in this chart since interest rates and inflation have also been low).<div>
</div><div>Stock market prices are based on productivity, not money turning over. As long as businesses are improving, stock prices will grow. I don't want to be mean, but I really don't think the things are saying are reasonable (paranoia) and you shouldn't be ignoring stocks. By the way, our finances are regulated... highly.</div><div>
</div><div><div>What is WS, by the way?</div></div>

 

[lanceharbor7]

The only person making any money is the insurance salesman and the insurance company.

 

[boomboommsu]

So you are saying, a broker will take a lower profit on a stock if it's productivity is higher? Did you know a smart pawn shop will turn down a 70% profit for a quicker 50% profit? Because the quicker profit can be turned over and profit on itself, earning 50% on that first 50%, for a 75% profit. That's why there's some value in hold-long stocks. If you buy low.

Stock prices are based on expectation of growth, not actual growth. Growth has to be higher than expected growth to turn a profit.

And we are past the post ww2 period. We are in the globalization period. Expecting the past to repeat itself just because is foolish.

And being bearish on the Euro is in no way paranoid. The only way to avoid a Lehman event ($55T CDS market) is to pay off the debts of the PIGS. They could handle that, but won't because of politics. But Italy is involved now too, and thats one of the top 10 world economies. There's no way out, save abandoning the Euro. And they won't face up to it, which is just making it worse in the long run. Maybe I turn out being wrong, maybe they muddle thru somehow. But I'm not wrong that the situation looks terrible right now. WS (Wall Street) is in because as I said they can get out fast enough to have barely any losses. No individual investor can do that. No individual investor should be near stocks.

 

[Hanmudog]

The only person making any money is the insurance salesman and the insurance company.

The cash value in my whole life policy would disagree with you.

As has been stated many times already, it is not for everyone. But if you max outyour other retirement and tax free options then a whole life policy is a good way to go for a long term investment that can grow tax free.It is not huge growth but it is steady (around 6%)which is not bad if you look at the stock market over the last few years. Plus with stocks you pay taxes before investing the money AND when you cash them out.

A word of advice from an old fart to some of you young farts: if you have a family, are the bread winner,and do not have some type of life insurance then you are gambling with your family's future. Unless you win the lottery, you are not going to accumulate alot of money in your first 10-15 years out of college and if something happens to you (carwreck, cancer, shark attack, heart attack at an MSU game, etc.) then your family will be screwed. You can drop the policy when you get older and you have money put away.

 

[patdog]

A word of advice from an old fart to some of you young farts: if you have a family, are the bread winner,and do not have some type of life insurance then you are gambling with your family's future. Unless you win the lottery, you are not going to accumulate alot of money in your first 10-15 years out of college and if something happens to you (carwreck, cancer, shark attack, heart attack at an MSU game, etc.) then your family will be screwed. You can drop the policy when you get older and you have money put away.

If you have a family that depends on your paycheck, life insurance isn't an option. It's something you MUST have, along with disability insurance (which you need whether you have a family that depends on your paycheck or not).

 

[Sterling Archer.nafoom]

the wife and kids be able to sustain their current style of living without changing anything. That means if she doesn't have a job, you should have enough for her to keep it that way. Or if she does, enough to cover your income, all future income, plus babysitters, etc. Anyone with a family should have at least a millon, likely several. Think about your family needing to pull out 150k every single year, without depleting, and keep them comfortable until their death.

 

[patdog]

And many don't need that much. Take out $150K per year? I'm going to guess that the vast majority of people on this board don't have that much income that needs replacing. If you make $60K per year, you're probably bringing home about $45. All you need to replace is $45K per year. $1M of insurance would be more than enough to do that. If you're buying life insurance to give your benefeciaries a windfall if you die, you're wasting your money (not to mention giving them a motive).

 

[saltslugs]

Growth does not have to be higher than expected growth to earn a profit. It simply does not.

 

[Sterling Archer.nafoom]

and I was assuming a family who currently makes about 150k. You could set it up in a trust or something so it's not just a windfall, but i would want my family to live the life they're currently accustomed to. That means having enough for the wife to stay a homemaker if that's what she does, put the kids through high school and college, and fund her retirement. If I were to retire today, I need about $3 million to last me for my life expectancy. That's not counting putting children through school, paying for day care, or even long term care for myself, and many other expenses. Try it yourself.

And even with your 45k per year, you need to factor in inflation, and health care, and other costs that go up as you age. But to get 45k for the rest of my life, I'd need 1.2 million.

LINK

 

[drunkernhelldawg]

The Dow was basically flat from the early 1960's to the mid 1980's. Good luck with that historical-analysis-based investing. Maybe you'll find somebody giving money away, but it's more likely to go the other way.

 

[Dawg69]

1 Stay out of debt is a good start. exception would be house or car.
2 Start and fund each year a Roth IRA in a self directed account with a broker.You can invest in a lot of different things.Then read and learn and follow your gut .All you earn is taxfree after 59.5 years of age. Start young and you can be conservative and accumulate a nice nest egg.