There are not a financial adviser on the planet worth his salt who does not recommend diversification.
diversification of asset classes. Diversification within asset classes. "Never put all your eggs in one basket," they say.
Why? Because it minimizes risk and smoothes bumps in the road by reducing the volatility of the value of a portfolio.
So what is missing?
The life insurance. life insurance is a different financial instrument of any of the foregoing. It is an asset class which has characteristics which perform far better in certain circumstances, all of the above. and while a portfolio perfectly allocated otherwise perfectly balanced can protect against certain types of risk, it fails entirely to you protect if not the time to perform.
Take Bob, 50, who has no life insurance, but stocks, bonds, real estate, and money . experts say that Bob and his wife will have plenty to retirement when he turns 65. But if Bob dies tomorrow - no matter how well diversified it thinks it is -. Its financial plan will have failed
Life insurance is the only way to protect against the possibility that you might not be there to see your flower investment, not including life insurance exposes your portfolio to significant risks.
Which asset class other than life insurance, guarantee turning pennies into dollars? The fact is, the chances of death are 1 of ONE ... that is 100%! We do not know when. And if that happens before the rest of your portfolio has time to do its work, your financial plan has failed, at least compared to your spouse, children and grandchildren.
Added a life insurance portfolio -looking at is as an asset class that provides what I call TIME DIVERSIFICATION -is the only way to protect against the very real possibility that you may not have time to finish the job. NOT including life insurance in a portfolio exposes the portfolio to significant risks that might otherwise be entirely eliminated. I'm going to say that, on the basis of market statistics, and my almost 30 years of experience, it may be the greatest control of our time.
Take a look at this link to Investopedia, which examines different types of different risk and diversification. They totally ignore the time as a risk and speak no time diversification. It's amazing to me that the paradigm of well accepted diversification could overlook this critical risk factor. But again, there are not so long that everyone thought the earth was flat and the sun revolved around the earth. It always takes time and lots of energy to change a paradigm.
The fact is, if you happen to die before his time, life insurance is an asset class that offers a return on investment (ROI) to death is impossible to match. And even if you happen to die when you are supposed (to your life expectancy actuarial) and its returns are always better than long-term zero coupon bonds. In fact, the return on investment to death, life expectancy is actually higher than the insurance company earns on premiums.
Life insurance is unfortunately the most universally misunderstood financial product on the planet. But when you really look at the numbers, it really is not difficult to understand.
I ask you, do you think it is likely or even possible that you or I will live long enough to make a bad deal on a life insurance policy? I do not think so.
And when you die, then you will probably leave many different assets, life insurance is by far the cleanest. When properly configured, the life insurance product are paid in cash within days, returned to properties and tax-free, are not subject to the costs and complications of the approval and, as such, may be immediately deployed for living expenses or other investments.
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