No. of Recommendations: 1
Is this the strategy you would recommend to our OP, instead of an IUL?

I'm not in the business of recommending specific strategies to people. Anyway, he couldn't afford what I'd charge. ;-)

If you would *not* recommend a long-term
You keep using that word. I do not think it means what you think it means.

... S&P500 strategy, and you've already admitted it doesn't match the performance of an IUL when safety is considered, why are you trying to push it as superior?

Um, because it *is* superior.

performance ... when safety is considered
The phrase you are looking for is "risk-adjusted return". It's a well-known concept in the field of investigating & analysing strategies. As the words imply, there are two components: 1) risk, 2) return.
It's the return considered in light of the risk. It's not all about "return", nor all about "risk", but the melding of the two. Low risk accompanied by low return is not neccessarily better than medium risk accompanied by high return.

What most people are looking for is the highest return they can get for an acceptable level of risk. And almost always, the lowest acceptable risk is higher than "no risk ever, no way, no how".

Actually, buy&hold of the S&P500 is not even in the category of outstanding strategies. But it beats buying an IUL.
Heck, a simple timing overlsy to the S&P is a large improvement over B&H. Only slighly lower returns but with much lower volatility.

The only time where an IUL is superior to simply buying the S&P is for people to whom any drawdown whatsoever is completely unacceptable, and who are oblivious to the fact that the returns are substantially less.

If you don't mind reaching retirement with $300,000 instead of $900,000, get an IUL.
To me, a $600,000 shortfall isn't worth the comfort of never having to see any intermediate drop in month-to-month value. What the hell, this is money you put away for 38 years, what's important is how much you have at 65, not all the little ups and downs along the way.

If you don't want to see a monthly statement showing a loss from the previous month, don't open the envelope. Just pass them right from the mailbox to the trashcan without opening them.
Problem solved!

You don't seem to recommend an apple, you prefer bananas, yet you want to try to compare apples to orangutans.
Apple, banana, pear, whatever. I don't have to recommend which one is the best, when all I want to say is don't eat a dog-t*rd. ANY of them is better.

fallacy .. that you cannot take market gains unless you also allow the market the opportunity to hand you losses. Its a fallacy.
You go right on thinking that.

A simply bull call debit spread (which is guaranteed to mature with a value between 'worthless' and 350%-ish up,) using 5% of your liquid account, financed by the safe yield from 95% of your account held in guaranteed/insured yield assets, does exactly this. A 340% gain on 5% of your account equals a 17% gain over the entire account, with zero chance of losing any of principal back to the markets.
And yet all those greedy Wall Street sharks, all those folks with maga-computers co-located with the NYSE computers, networked with fiber-optics because 1GHZ ethernet is too slow....all those smart guys who grok gamma and delta and theta as easily as you or I grok change for a $10 bill --- those people never realized that there is this simple technique will give them guaranteed 17% gain with zero chance of loss.

Color me sceptical.

I can't count the number of times I've read somebody's foolproof method to make money with complex option strategies. They always end in tears.

I have the historical "total S&P500" data (with the shifting dividends,) back to inception now.
Great! Is it posted somewhere for download? If not, can you put put it up somewhere?

Once the model is solid, we can run it for successive rolling periods to see the difference, and how much the risks cost, versus how much safety costs.
Sounds good.
Although, at some point -- which is rapidly approaching -- all that needs to be done is upload the spreadhseet somewhere it's publicly accessible. Then people can d/l it and plug in parameters on their own.

'course, first the spreadsheet needs to be correct and free of errors. And preferably have accurate dividend information, rather than just a fixed estimate. If you can't get that data to me, maybe I'll try to eyeball it from the chart. Rather have the numbers, though.

Thanks for catching my error on the m-m vs. y-y for the way IUL caps work. I hope that's the only error.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.