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Author: progmtl Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: What My Financial Adviser Recommends Date: 5/22/2014 4:11 PM
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Recommendations: 46
Here's one person's knee-jerk reaction...

That is a sleazy proposal. A few reasons why this is not good:

1) He talks about a 1-month performance. Really? If he is trying to educate you, he should be emphasizing long term returns and ignoring the short term noise. If the 1-month performance did not look OK, you can be sure he would have picked a different timeframe that looked better.
2) He uses the Dow Jones Index as his benchmark. This is NOT a great proxy for the US total stock market in modern times; it only contains 30 stocks. A better proxy would be the S&P 500, and even better than that would be one of the total market indices which are readily available today. He surely knows this. He picked the Dow because it underperformed the S&P during the timeframe in question, so it makes his results look better.
3) Universal life? I am no expert on these ridiculously complex products, but then few people are. Therein lies the rub: the endless small print and the many ways in which your fees and contributions will benefit the life insurance company (and him, the salesman who gets a commission) rather than you. If you want life insurance to cover your final costs, get a small level term life policy which will be dirt cheap. Invest any extra you would have spent on universal life into broad market index funds and you will likely do MUCH better over time.
4) Predicted 50% tax rate? When? On what? Scare tactics so you will fear future taxes and favor his universal life proposal.
5) Funniest part: he has a SHORT BOOK detailing the universal life policy - only 100 pages!!! Hilarious. 100 pages of legalese BS designed to protect the insurance company, separate you from your money, and dress everything up to appear as if it's in your favor.

About the only reasonable thing he mentioned was a 70%/30% division between stocks and fixed income. I am 40 and fairly aggressive and I use an 80/20 allocation. But this needs to be tailored to risk tolerance, and 70/30 is reasonable.

You can do this yourself. It's easy. Buy low cost index funds across a few diversified market areas to achieve your desired asset allocation and STAY THE COURSE through market gyrations. Keep contributing as much as you can. You will be in good shape.

-progmtl.
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