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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76395  
Subject: Re: Strategy comparison S&P500 vs. IUL [rev 1] Date: 4/4/2013 4:35 PM
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but the parameters, what-ifs, definitions and machinations have gotten so complicated as to render a comparison (S&P500 vs. IUL) moot.
The comparison is not moot at all. It *is* getting complicated. Largely because there are a lot of potential parameters.

I've been through this type of analysis & comparison before, on other proposed strategies. Invariably, the proponents keep kicking up dust and complaining that you neglected to take some important factor into account. And then when you incorporate the factors that they complained were missing -- they complain that it's too complex.

The practical reality is that an IUL...
This 8-bullet-point list is an example of what I mean by kicking up dust.

To take a few of them...
Pays a death benefit,
Geico quoted a 20 year level term life insurance for a 40 year old male for $400/yr. That's $500,000 death benefit. Cheap, and doesn't have any entanglements with your investment portfolio. And you don't have to worry about losing your insurance if you decide to liquidate the investment, or vice-versa.
A $1,000,000 policy is $725/yr.


~ Charges fees far lower (.75-1.20%) than mutual funds, 401(k) and IRA (3-4%).
Give me a break!
The expense ratio of SPY is 0.09%. That's NINE basis-points.
Fidelity Spartan is 10 bps.

blah blah blah


Compare the above against trading naked in the S&P500. No contest, in my opinion, albeit we don't seem to be able to arrive at a simple comparison of percentage gains via back testing.
Maybe you looked at the charts upside down??? I assuming you *did* look at them, right?

Because when I look at them, the IUL line is far far below the two S&P500 lines.
Not just a little bit below, where you have to squint to see the difference.
A lot bit below, as in $373,000 vs. off-the-top-of-the-chart-$1,116,000.
A little difference in that the "naked" "unhedged" S&P500 investment has a final value three (3) times larger that the IUL final value.
But then, maybe you're the type of person who doesn't mind leaving $743,000 on the table.

[More follows.]
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