General Topics
Technical Topics
Brokerage Firms
Community Lounge
Site Support

# Guess what a life insurance salesman told me?

Discussion in 'Chit Chat' started by jrlvnv, Apr 21, 2012.

1. ### jrlvnv

She can get me a 25% annual return in 4 years. Now I know at this time she was going to play with numbers but this is how she did it.

I have 100k, market goes up 100% now I have 200k,
Next year market goes down 50% I have 100k,
Next year market goes up 100% I have 200k
Next year market goes down 50% and I am back to my 100k

BUTtttttt she says, I just gave you your 25% annual return and you have nothing to show for it. There was a lot more involved in the conversation but it just started to get me thinking.

"They" say the market has returned on average about 8% a year. Now is it really a true 8% of your money? Or is it just a 8% but not a whole lot to show for it?

2. ### TD80

I'm not sure how you could have joined in 2005 and be posting this, did you just come back after a 7 year hiatus?

You point out "average annual return" which means nothing, and no one with any ounce of credibility would market or hang their hat on such a statistic.

The only thing that matters over time is "compound annual growth rate", and that (or "total return") is what you are going to see in credible performance claims, which includes the buy-and-holders.

If you aren't just trolling and you really had this conversation with this individual, take your money (and insurance patronage) and run far, far away...

3. ### Lornz

It's important to understand the difference between geometric and arithmetic means.

http://en.wikipedia.org/wiki/Compound_annual_growth_rate

Start value 100, finish value 100. Return = 0%.

Maybe this is more intuitive:

100k * 2 * .5 * 2 *.5 = 100k

I suspect you are trolling, but I'm also quite certain that some of the readers of this thread will fall for the faulty logic.
It's very easy to compare the price of the S&P500 now to x years ago and compute the return. That's excluding inflation, of course -- which will give the "real" return.

4. ### shopster

<object style="height: 390px; width: 640px"><param name="movie" value="http://www.youtube.com/v/hue_KeJ97l0?version=3&feature=player_detailpage"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://www.youtube.com/v/hue_KeJ97l0?version=3&feature=player_detailpage" type="application/x-shockwave-flash" allowfullscreen="true" allowScriptAccess="always" width="640" height="360"></object>

cheers,

s

5. ### jrlvnv

I was really hoping to get deeper in the conversation about the insurance. Not sure why you think I am trolling. The salesrep put some pretty interesting numbers.

6. ### sledgeyum

If you are happy with 25% return and nothing to show for it, then take it!!!

If you had brains, you'd get out after +500%, before she lose your money.

Finally, this was discussed in another thread here. Use the search f(x).

7. ### jrlvnv

I don't think I explained myself correctly. The senerio she gave was just show me that when you hear about annual gains, they really don't mean much. She then went in to show how I would need about a 9% return on my money in the market to outperform what a life insurance policy could return.

I always heard that whole life was a waste but she made a great case for it.

8. ### shopster

most life insurance policies have a guaranteed interest rate for ROI.
it is usually 4% per annum.

there are no rock stars managing money for insurance. they just want to meet the market index less their fees.

get it all in writing.

sales jocks will spew out anything to get you to sign a contract.

ask for all illustrations to be printed out

look for flat line mortality charges.

also look at UL ins. vs. whole life.

http://www.lifeinsurancequote.com/articles/universal_compared_to_whole_life_web_article.asp

cheers,

s

9. ### stock777

these are the same co's that used lists of deceased parties to cut off annuities, but 'forgot' to use them to payoff death benefits.

10. ### blackstormcap

#10     May 1, 2012
ET IS FREE BECAUSE OF THE FINANCIAL SUPPORT FROM THESE COMPANIES: