2018…It was a year that recorded multiple historic highs as well as the largest single-day gain in history. But it turned into a loss for most investors. In fact, according to MarketWatch, 90% of the 70 asset classes cited in the Wall Street Journal posted negative returns for the year. The previous worst time in history for this to occur was in 1920 when 84% were negative. And to gain proper perspective, 2017 marked a mere 1% of asset classes in negative territory.
Meanwhile, a Participating Whole Life insurance policy that I took out in 2007, experienced a 14.49% gain over premiums paid for the year. As this policy has cash values that are greater than total premiums paid (cost basis) we are delighted with the returns this policy provided this year. And we are looking forward to the positive returns which this policy is guaranteed to provide in the future, regardless of years like 2018 or 1920.
You see, Participating Whole Life insurance is a buffer against “bad hair” days in the market. Buffers are used in chemistry to keep pH values constant, and in the financial world, life insurance can become a buffer that keeps the value of your portfolio when the market strips you. For example, if you had invested in the S and P 500 at the beginning of 2018, your loss for the year would be 11.76%, even without the fees. This means you would have ended the year with 11.76% less than what you started with, minus any trading fees. However, a Participating Whole Life insurance policy, similar to the one we have owned since 2007, could have made your 2018 a positive year as the 14.49% gain could have been greater than your 11.76% loss (depending on the amount you are trading the S &P 500 with and the total premiums you are paying to your Participating Whole life insurance policy.)
That being said, if you had borrowed from your Participating Whole life insurance policy to invest in the S & P 500 this year, your policy would have still grown while you lost money in the market. And the interest you would need to pay for the policy loan you took to trade with would be a tax deduction on your 1040 Schedule A, classified as an investment risk. This logical plan of investing can keep your portfolio values in volatile times in the market as we have witnessed in 2018.
Still, those who don’t understand Participating Whole life insurance call it a poor investment. Yet, because Participating Whole Life is not a speculative investment, but rather an asset purchase (the death benefit), it develops equity over time as you make your premium payments. This is similar to how you develop equity in a house as you make payments to the bank. In either case, this equity, both in Participating Whole Life and real estate, becomes available for you to leverage and invest with. But unlike an equity loan on real estate or a margin account loan against your portfolio, a loan against your Participating Whole Life insurance policy death benefit buffers any negative affects you might experience because the underlying asset, the death benefit, cannot be reduced, as happened this year in securities or as it occurred in real estate in 2008. This means that your Participating Whole Life equity continues to grow even if the money you leveraged against your death benefit lost money, earned money, or remained neutral.
You need a buffer to protect yourself against volatile years like 2018, 2008, 2001, 1987 etc. And Participating Whole Life insurance has a track record of being the best buffer that you can comfortably and affordably maintain. Others may tell you Universal Life products will work just as good or better than Participating Whole life insurance products, but they are wrong. Variable Universal Life products are invested in securities and Indexed Universal Life products mirror the performance of indexes like the S & P 500 and Russel. So, when market volatility becomes intense, like it was in 2018, there is nothing, to very little, for you to gain and so the value of the underlying product is reduced. This is because by mirroring or actually being invested in the market these Universal products can’t act as the buffer you need to protect the value of your portfolio and build the sustainable financial future that you can count on to be there for you.
That being said, owing Participating Whole life insurance in volatile times like 2018 or 2008 has been the most valuable asset that we own. And it can be the same for you as well. Learn the importance of owning the best buffer you can own so you can retain the value of your portfolio during these rough and turbulent times. Discover why Participating Whole Life insurance is not only affordable but dependable. Once you understand how it can protect your gains and limit your losses, you’ll realize why Participating Whole Life insurance has been around for the past couple centuries. Participating Whole Life insurance isn’t just to protect the other guy. It protects you too!