For years I have insisted upon “evidence based” investing. That is, look at the historical evidence of an investing strategy first. I mean really look at it. That idea is the foundation of my thinking on investing and has served me well since the late 1990s when I first put it into play. That is why I no longer invest in mutual funds. That is why I invest in strategies that keep taxation to a minimum.
It didn’t take to much time to see that the “invest in mutual funds inside an 401K/IRA wrapper” was a flawed concept that had individuals getting 2-5% less than what the actual mutual funds returns where and to see that by deferring taxes you end up paying more.
Even a cursory bit of research discovered that investing in real estate rendered better results [assuming you were willing to take the time to learn how to do it] than investing in equities. Or that investing in increasing dividend producing equities had better results than in growth equities or index mutual funds.
The History of the EIUL
When it comes to EIULs the same logic applies. We have more than a 15 year history on EIULs. And that history encompasses some very choppy investing years. That’s a nice way to say the market has been really bad since 2000. Sometimes my clients are skeptical to the point of increasingly asking “what if” questions followed by more “what if” questions followed by more “what if” questions. I do pretty good on the first set of “what if” questions, but as the questions get more particular and off the beaten path I find myself fumbling. So I find myself repeating this mantra, “EIULs have a history of behaving exactly like they were designed to work.” The returns inside EIULs since they were initiated are between 7.5% and 9% depending upon which policy you had.
This over a time that the stock market has made little upward movement. These are the facts or the data that should guide your decision. If your emotions suggest that the stock market is not going to give you as high as return as it had in the past, then that is 1 more reason to look into an EIUL because the interest credit has been higher than the overall stock market returns. Insurance companies aren’t in the business of giving away money, so if this product didn’t work as designed causing losses or financial instability then they would not continue to sell the product as currently structured. They would pull the product or re-structure it so they made a profit.
Seeing is believing. Trust the evidence of past performance. Aren’t you doing that with your real estate investing?
Photo: Vincent VF