Alba Insurance, LLC

Today's topic: Diversification.

When it comes to investing, we have all heard the old saying: “Don’t put all your eggs in one basket”, right? That rationale sounds right, in view of the historical trends in Wall Street. In the old roller coaster rides of the market, it is best to play it safe; after all, no one truly knows when a stock will skyrocket or tumble. So your earnings are always at the edge of a gamble. In order to “balance” the risk, you spread your portfolio over a variety of stocks, hoping and praying one of them will gain enough earnings to offset any losses of other stocks, kind of spreading the risk. At the same time, however, you are thinning your prospects for growth. For example, let’s say you diversify and spread your investments over five separate accounts. One of them would have to skyrocket to 50% for you to have a 10% return in that one stock. That would be a decent return, and highly unlikely. If you were 100% invested in that stock, you would have gained 50% and be ahead of the game. Instead, you got 10%. Yet who’s to know which stock is going to do what when? So, you diversify and water down your gains in the process. The main reason for this diversification notion is to balance out your gains vs. your losses; you’re playing not to lose. And in this scenario, that makes complete sense. However, what if you had an account that guaranteed you no losses--zero, nothing, zip, nada, while giving you all the gains of the account? Sounds absurd, I know, but what if there was such a thing? A second, third or fourth basket would be optional, but for most folks, one would be sufficient. Think about it, if you had an account that would guarantee you no losses at all, with all the gains of the account, what percentage of that would you want to get? Let me assure you, I am not making this up, there are such accounts. The well-to-do refer to these accounts as 770 plans. Similar plans have been used by countless others, including Walt Disney, Ray Crock, J.C. Penney, and others, to establish themselves. They are not secret plans; it’s just that most brokers are not familiar with them, so they can not offer you something they are not acquainted with. I have been thoroughly trained in such plans and can tailor them to your advantage. These plans allow you to play to win, not just stay afloat. Why gamble with your retirement money? Call, text or email me to discuss these plans in detail, at no cost or obligation. My goal is to help you retire with dignity. The other option is to continue to gamble with your investments by diversifying, thus watering down your gains. There’s a smarter option. Do what the rich do. Secure your retirement money. Call, text or email me and we can discuss this further.

Truly,

Javier
623-340-9249

I’ve been asked by some to clarify my last blog on arbitrage. We well know how banks operate. You put your money with them and you would be lucky if you get 1% interest for it, right? Yet they turn around and charge 17%, 18% or higher for a loan they make to others, with that same money you deposited. That spread is called arbitrage, or the difference between what you pay for money vs. what you stand to make from it. You do know that banks do not lend you their money, right? They lend you money other depositors put into the bank. Since I was referring to IUL loans, let’s look into that.
A loan from an IUL policy is not your typical loan. First of all, you have to have some money accumulated within the policy. When you ask for a loan, they cannot lend you from money in your account; that money is already committed to some investment by the insurance company, I’ll refer to them as the “company.” When your request comes in, the company establishes an account, like a tab in your name, and “lends” you the money asked for, from their own coffers, with your policy as collateral. For this, they charge you interest. Typically, that charge is 4%, though it can vary from company to company. So, let’s say you have accumulated $10,000 in your IUL and you borrow $5,000. Again, no one is going to demand you pay that loan back while you are alive, so you still have $10,000 in your policy, as if you never touched it. Some opt not to pay that loan back. Instead, they pay it as a premium back to their policy. That goes towards the accumulation within the policy. So now you have $15,000 in your account that can earn you 12% or better, while paying 4% on the $5,000 you borrowed. Even when the index only earns 4%, you still come out ahead, because you are getting 4% on the $15,000 in your account and only paying 4% on your $5,000 loan. In doing so, in essence, you are doing the exact same thing the banks have been doing for centuries—a process called arbitrage. How many times can you do this? As long as you have money in your account. What can you use that loan for? Whatever you choose. Borrow the money, a bit at a time, to pay for your car, your credit card(s), even a mortgage, or whatever else you wish; it’s your money. Plus, because the money accumulated in your policy has gone unused all this time, it is still there for you to use, maybe for retirement? Is this legal? It sure is, as long as the policy is structured properly. Remember that the more money in your account, the higher the death benefit, due to the “corridor” (a term I can cover in a later blog), structured into each insurance policy. By the time you die, your death benefit has grown in value, as well. So when you die, the loan is paid back from the policy and your heirs still have their inheritance money. That’s the beauty of the IUL. I call it “insurance, grown up.”
A word of caution: just because it is an insurance policy does not mean every insurance agent is familiar with how to maximize the IUL to your advantage. It has so many moving parts, it has become a specialized area within the insurance field. If the policy is not structured properly, it will not function as described above. For further clarification, a FREE review of your existing policy, or additional comments, email me at [email protected]. Learn how you can retire with dignity. Email me today and I will send you a FREE book detailing this process and other money tips.