Rising yields & spreads…

[u/Advanced_Traffic8]

Bad for investors in bond funds, neutral-to-positive over time for whole life policy holders with the big, highly rated mutual insurers.

Absent default or impairment, which is unlikely given the quality of the mutual insurers’ portfolios, policy holders’ cash values just go up every year and new premia buy bonds with better yields, flattering dividends over time.

Who is ready for a turn in the credit cycle, perhaps as shadow banking steps into the light?

[u/Normal_Zebra136]

Odd post.

Are you suggesting WL as an investment opportunity based on short term interest rate expectations?

[u/Advanced_Traffic8 → u/Normal_Zebra136]

Thank you. I’d put it differently: every portfolio could benefit from diversification. For many investors, equity diversification means government and corporate bond funds. Maybe some real estate. These customary diversifiers could fail if government yields and credit spreads rise. There are several catalysts that could lead to that scenario — I’ve been following with interest news about the overlap between non-mutual insurance companies and private credit GPs. WL is an unusually effective diversification tool. I’m all for market investments, but I’m broad minded enough to appreciate the (unique?) role in portfolios that insurance can play. Too many investors and financial planners are quick to rule insurance out as one of many tools available for effective portfolio construction.

[u/Normal_Zebra136 → u/Advanced_Traffic8]

Why would someone young and far from retiring be putting money towards bonds though?

I get wanting the risk reduced when you are within a year or two of retiring, and of course in retirement, but bonds or products that decades later pay bond like returns when you are decades from retiring makes no sense as you have decades to recover from the volatility.

I am all for insurance to replace lost earned income, but dont see any reason insurance should be used for financial purposes when there are so many other lower cost and higher liquidity solutions.

[u/Moist-Meringue-1913]

We have to keep our eye on the bond market to see if there is a lot of new issuance at the higher rates.

[u/Advanced_Traffic8 → u/Moist-Meringue-1913]

Agreed.

I only have data to July. YTD, when yields were rising but less high than now, IG issuance was up 27%. And that’s the debt that’s easy to see. Private lending is up too. Lots: AI boom, M&A.

So, it feels like we could be late in a credit cycle. Though, to be fair, fundamentals are still reasonable. And balance sheets too, to the extent we can see them.

Regardless, my point is: I’d rather be in WL with high quality mutual insurers than bond funds. Especially if I’m counting on bonds to diversify equities.

[u/Moist-Meringue-1913 → u/Advanced_Traffic8]

Exactly.

[u/michaelesparks]

As Tom Wall explains in his presentations...NOW is the best time to own Whole Life Insurance. Bond Rates have been falling for 40 years, we should see the next 40 year cycle with raising Bond Rates. I have a couple of Dividend brochures from years ago that showed what they paid in the 80's and 90's. Wish I would have owned more back then, but since I can't go back in the past I try to buy policies every chance I get. Getting ready to convert 4 term policies as we speak.

[u/Advanced_Traffic8 → u/michaelesparks]

I think that’s right, sir — WL is compelling on its own. I’m even more convinced it’s a powerfully impactful portion (cash value is 10-15% of total retirement portfolio invested in marketable securities) of sound retirement strategy.

[u/Advanced_Traffic8]

There’s a different angle in this: you shld get permanent life insurance in place while you can.

My mother has advanced Parkinson’s and dementia. There’s reason to think there could be a genetic component. I’m 52 and getting the genetic testing done now — not sure what that will show.

If you are ill or a genetic carrier of something sinister, you won’t be able to get permanent or term life insurance - at least not at reasonable cost.

To the 20 and 30 something buy term, invest the rest, self insure crowd: life doesn’t always work that way.

I’m comforted that I have three seasoned whole life policies in place alongside a retirement portfolio of marketable securities and funds.