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Author: sykesix Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: 7702 Private Plans (indexed universal life) Date: 3/30/2013 3:14 AM
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Who? Would they have the stones to step up to an apples-to-apples performance comparison?

Comparing apples to organutans is rather pointless. I have great systems to outperform the S&P if I am free to take drawdowns... why bother, that's not a challenge.


If I may back up a bit, this debate arose over the claim that IUL provide "market returns without market risk." (or something very close to that statement). That's the question that kicked this whole thing off. I'd like to return to that question, because it is a good one.

If we are going to evaluate that claim, then we have to look at how a IUL performed vs. "the market." For purposes of this discussion, it appears to me people have been assuming the market is the S&P 500 index. I think that is a reasonable assumption. One other assumption is that we are looking at retirement time horizons. Twenty years, something like that. The OP was looking to do this instead of his 401(K), so those assumptions seem reasonable to me.

Ray showed pretty convincingly that IULs don't outperform "the market" over time. There are only two reasonable conclusions from those data:

1) Ray's backtest was in error
2) The original claim was bogus

Since the IUL proponents haven't pointed out any errors in Ray's methodology, 2) becomes the most likely explanation. Obviously, that means IUL underperforms over retirement time horizons.

Now the conversation has shifted to something like "find something better than a IUL." But the original question is still with us. Do IULs provide market returns without market risk? AFAIK, the answer to that question is no. And none of the IUL proponents have tried to step up and show the answer is yes.

If the question was "show me a condition where IULs are awesome" I'm sure we could all come up with some examples. But that wasn't the main question. And if we can't figure out the answers to the big questions, the niche conditions are meaningless.
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