Money & Investing - Banks.com

Many insurance sales people will try to sell you life insurance that builds cash value. These policies can be good for some people, and may not be adequate in terms of returns for others (especially right now). In the end, it’s up to you. Back in the day, my husband and I, newly married and completely clueless, bought small universal life insurance policies. They are doing reasonably well, I suppose, and they are so small that we haven’t bothered to change them. Besides, we expect that we’ll cash them in in 25 years and celebrate by going on a nice vacation. But there are other life insurance options out there.

One of them was a “return of premium” life insurance plan that I read about on Bargaineering. This plan allows you to get all or part of your premiums back if you actually outlive your term life policy. (It is much more expensive, though, as you might imagine.) But would it be worth it? Could you make more by investing the difference? Jim offers this math about a particular plan:

While appealing, would I be better served taking the $34 difference in premiums a month ($76 - $42, TransAmerica) and investing it? After 30 years, assuming 8% annual growth and $408 in annual contributions, the investment would yield over $46,200. Cut away 25% for Uncle Sam, subtract the $15,120 in premiums and you end up with $19,530, which puts you behind about $8,000 behind the premium life insurance plan. However, you do retain control of your money. (For those interested, the breakeven point requires an annual appreciation of 9.63%, taxes are such a pain huh?)

So, maybe, it would be worth it to consider a term life plan with a return of premium policy. Of course, you have to make sure you outlive the policy, or the investment is better. Another consideration: You can spend the investment earnings all along the way; you have to wait until the end to take advantage of the return of premium.

Image by AFP/Getty Images via Daylife

The stock market is in the midst of a rally this morning as consumer confidence sends a jolt of optimism through investors. Indeed, consumer confidence news has upstaged North Korean missile test news and the data showing a rather dramatic decline in home prices, reports MarketWatch:

“It’s amazing because Dow futures were trading down and we were all bracing for ‘oh my god,’ after North Korea and home prices,” said Daniel Morgan, a portfolio manager with Synovus Securities. “But the market already knows about the problems out there and is simply trying to evaluate where we are in the curve.”

Consumer confidence data is taking precedence over other data, probably because consumer activity accounts for 2/3 of the economy. It is one of the most important indicators of economic health — or at least what economic health is expected to be in the future. With this surge in consumer confidence, there is hope that consumer spending might pick up, providing economic growth and sending the message that company profits (and higher stock prices) could be on the way.

Confidence and the stock market

Confidence is an important part of the stock market. Indeed, the stock market gains and loses depending upon how investors feel about how the companies on the market are doing. If they  feel as though the economy will pick up, and that profits will rise, they tend to buy in order to be well-positioned. This in turn sends the stock market higher. If the economy looks grim, however, investors become worried that they will lose their investments. Instead, they put their money elsewhere (in bonds, for example), and the stock market drops as more people seek to sell.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Today is the observation of Memorial Day. I would like to express my gratitude for the brave men and women who work so hard and have given so much to defend our country. And, of course, it is also a worthy goal to think of those who have gone before to build our country in wars since the Revolution. (I just finished watching John Adams, so the Revolution is on my mind.) At any rate, I started thinking about war bonds recently. They were issued during the Civil War, World War I and World War II here in the U.S. Other countries have used war bonds as well. I thought that Memorial Day would be an appropriate time to take a brief look at these investments of a bygone era.

War bonds

War bonds were issued to…pay for war. Citizens were encouraged to buy war bonds to help fund expensive wars. A bond is basically a loan to the government. War bonds were offered in a number of denominations so that anyone could afford them. Wikipedia describes the denominations of war bonds during World War II, which featured an even more widespread public program than World War I (which saw mostly banks investing in war bonds):

Three new series of bond notes, Series E, F and G, would be introduced, of which Series E would be targeted at individuals as “defense bonds”. Like the baby bonds, they were sold for as little as $18.75 and matured in ten years, at which time the United States government paid the bondholder $25. Large denominations of between $50 and $1000 were also made available, all of which, unlike the Liberty Bonds of the First World War, were non-negotiable bonds. For those that found it difficult to purchase an entire bond at once, 10 cent savings stamps could be purchased and collected in Treasury approved stamp albums until the recipient had accumulated enough stamps for a bond purchase.

Now, of course, we no longer have war bonds. But ordinary citizens can still help fund government spending by purchasing U.S. Treasury Bonds  — which are available through Treasury Direct. The current way that business is done by the government precludes the need for specific bonds issued for war.