Risk Models Explained
Risk Based Investment Models Explained
A common mistake that a new investor can make is implementing an investment strategy that is too aggressive for their risk tolerance. That mistake goes unnoticed in a rising market but can become very clear when investment prices recede. We have found that clients have the best experience with their investment accounts when we help them select an investment strategy that is truly in line with their risk tolerance. This allows investors to stay invested through market cycles, benefit from normal market fluctuation and reduce tax exposure for accounts held outside of an IRA. Derek Ballinger, Crosby Advisory Group’s chief investment analyst explains our risk-based strategies in this short video.
IUL Policies Provide Answers to Multiple Problems
Indexed Universal Life (IUL) policies have become very popular over the past decade. IUL offers higher potential for cash accumulation than traditional whole life but can also provide some level of minimum guarantee. IUL policies are linked to an underlying investment but not directly in it. The most common would be to link IULs to the performance of the S&P 500 (U.S. large cap stock) index. Interest credit to the cash value can range between 2% and 11.55%, depending on the performance of the S&P 500 and the minimum guarantee offered by the life insurance company. A 25-year back-test of an IUL policy with a cap of 11.5% and a floor of 2% would have produced a tax-free compounding growth rate in excess of 8%*. It is for this reason that some of our investors have chosen to replace historically conservative portions of their portfolio with an IUL because their performance has outperformed Vanguard’s Total Bond Market ETF and provides a tax-free death benefit. IUL’s have gotten better in my opinion.
Companies like Midland National now allow IUL policy holders to pull up to 60% of the death benefit prior to death to pay for nursing home costs. For the middle class, long-term care costs of nursing homes can drain life savings, limiting the ability to pass wealth onto family members. For those who are healthy enough to qualify, and IUL policy can now:
- Provide safe growth of money
- Provide a death benefit for family security
- Provide a solution to pay for long-term care costs to preserve life savings
*Note the ability to use up to 60% of the death benefit to pay for long-term care costs is triggered by the policy holder being unable to perform 2 out of 6 daily activities of living (bathing, eating, toileting, dressing, transferring and walking). Failing to be able to perform 2 out of 6 ADLs is a common determination for traditional long-term care insurance as well.
*25-year back-test does not guarantee future performance.
Vehicle Layup Coverage
Spring is here and with it warmer weather. If you have vehicles that were put on lay-up coverage to save money on insurance costs, please remember to contact your agent before driving them.
Nate’s Garden Tip
Soil is everything. My home was built on soil that is mostly clay. I have worked on improving the soil in my garden for years. I have composted vegetables, eggshells and used coffee beans. While that has helped for sure, it would have taken me a lifetime to improve the soil through composting alone. I began hauling in new soil to speed up the process. Plants like a variety of soil. I mixed several different soil types together. So far, my prize-winning soil combo is garden soil and mushroom soil or mushroom compost. The mushroom soil was recommended to me by a client, and it has made a tremendous difference in vegetable production. Your local landscape company may have it in bulk, or you can usually buy it at your local hardware store. I always throw in a bag of sand as well to help with the drainage. Best of luck this year.
Disclaimer: Crosby Advisory Group, LLC is a registered investment advisor. This newsletter is for informational purposes and does not reflect direct investment or tax advice. Investing involves risk including the potential loss of principal. Not all investments are suitable for all people. Crosby Advisory Group, LLC has ownership interest in NMD Insurance Agency and CAG Marketing.
