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Food for Thought November 13, 2013

Posted by shaferfinancial in Finance.

Just thought I would add some thoughts for people.

Many critics of Life Insurance as a savings vehicle like to think that mutual fund companies are not making as much profits off their products as insurance companies.
But, if this is so, why have almost every life insurance company moved strongly into offering mutual funds? I mean why would you risk cannibalizing your high profit margin life insurance/annuities for low profit margin mutual funds? Answer: You wouldn’t.

Logic: companies have a similar profit margin between mutual funds [even so called low cost funds] and life insurance/annuities.

Logic: all financial products have costs that allow for companies to make a handsome profit. Assuming one successful product is better than another because the company is willing to accept lower margins is foolish.

Most people ignore the “actual” returns folks get from mutual funds [even those low cost ones].
Why? Because everyone thinks they will be above average.

Logic: People overestimate their ability to withstand market downturns.

Logic: Avoid products that put market risk [large downturns] onto the consumer.

Anytime both the government and Wall Street are telling you what is best for you to do you should be very skeptical.

Logic: Assuming corporate interests and the government together are capable of giving good advice is crazy.

Logic: Run from any plan that has both the government giving you “breaks” and corporate interests [Wall Street] administrating said plan.

Have a great day!



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