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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 75781  
Subject: IUL vs. B&H -- best & worst 20 years. Date: 9/23/2013 4:47 PM
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IUL vs. B&H -- best & worst 20 years.

It occurred to me that some IUL vs. B&H questions might be more easily answered if we limited the dates down to a small number of interesting dates. After all, we care most strongly about bad times, where portfolio failures are likely. Looking at every possible date just gets confusing and important details can get buried in a mountain of data.

Using data from my spreadsheet and the Allianz illustration that Dave recently posted, I picked a few dates of interest and copied the data into another spreadsheet so I could create charts.

The charts show the 20-year equity curves for the various accounts -- illustration, S&P500 B&H, IUL, and IUL with the 10% load.

The start dates are:
* Worst 20 year period (Apr 1962)
* Best 20 year period (Apr 1980)
* Just before a bear market (Jan 1973)
* Recent 20 years with two large bear markets (Jan 1993)
* The 20 year period with the highest volatility (often termed risk) (May 1968)

Image of the charts: https://www.dropbox.com/s/gn6unrbq2l6ce3t/Best%20and%20worst...

The spreadsheet:
https://www.dropbox.com/s/6mkvelkezbix1cd/Allianz%20IUL%20Hy...

The full comparison spreadsheet was just updated and is still: https://www.dropbox.com/s/cbzvg74iyeyfwt6/SPX-monthly-1950-2...

======= Commentary & Observations ==========
The equity curve of the IUL Illustration is right smack-dab between the curves of the best & worst years. This cross-check confirms both that the Illustration does show good representative values, and that my spreadsheet computes the IUL correctly.

* The worst-case B&H is close the the worst-case IUL.
* The worst-case B&H tracks very closely to the Illustration.
* The best-case B&H is substantially better than the best-case IUL.
* When hit by a bear market shortly after the start, the B&H is initially behind the IUL but recovers after a few years.
* During a period of high volatility, the B&H and IUL are approximately even, and change places many times, for a long time. Neither is clearly ahead until many years have gone by.
* In none of the periods examined does the IUL substantially outperform B&H.
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