What is the best long term investment? Stocks, real estate, or investment grade life insurance?

Question

Stocks have a down side. Real estate may also have a downside, along with liquidty. Investment grade life insurance has limits.

Answer 1

NEVER and I mean NEVER "Invest" in life Insurance! Thats an order! Best long term real estate investments are REIT's, you want to find a fund that manages large office buildings and other commercial real estate that is rented or leased out because there is always demand for prime office space, check out Alpine realty fund or Ivey Real estate fund. Stocks, unless you have some inside info or know what your doing, day trading stocks is a losers way to get started in the stock market. Mutal funds offer the best protection from market fluctuations, or stocks that have been around a long time and that pay dividends, never by a stock that pays less then .50 cents a share and never buy a penny stock unless you know its a good investment. Shelter all investments from taxes, keep good records and use your investments to help generate bigger tax refunds that should be invested not spent. Any good tax advisor can help you with that, if you go to a CPA make sure they know how to do taxes, most don't.

Answer 2

If you look purely at the returns, then stock is the best long term investment. At least historically it's been that way. However it can have very high volatility.

Real Estate has been on a tear lately, but bull market in real estate doesn't come very often. Otherwise, real estate grows slow and steady. The illiquidity makes real estate less volatile.

Don't know much about investment grade life insurance, but from what little I know, those tend to be rip-offs. You are better off buying the insurance and investment parts separately. Lower fees and greater flexibility.

Answer 3

Hi, your friendly insurance guy here again. A few quick points: 1. Life insurance is not an investment. While some life insurance contracts include features like separate accounts with funds in the market, the insurance itself is not an investment and it's against regulations to present it as such. 2. The only typically used insurance contracts that have separate accounts in the market are Variable Life or Variable Universal Life contracts. Since the death benefit (the amount paid out to your beneficiary upon your death) changes with the performance of the funds in the separate accounts, it's generally a poor choice. Reason: the primary function of life insurance is to push risk away from the insured, meaning you. The risk life insurance pushes away is the risk of financial trouble for your survivors when you die (not if, WHEN). Having the death benefit fluctuate with the market pulls risk right back in your direction. 3. If you want to use an insurance product, Whole Life insurance is the way to go. You are young, and, if you are healthy, the premiums will be as low now as you will ever have them. It will allow you to secure your insurability and make sure that no matter how old you get, your surviving family will get something. If you choose this option, go with a Mutual company. Stock companies owe their dividends to stock holders first of all. Mutual companies are owned by the Whole Life policy holders, and those policy holders get the dividends. That means that, while no company can guarantee dividends, since dividends drive cash value growth in Whole Life you'll tend to get the best bang for your buck in a mutual company. Three of the strongest mutual companies are: Massachusetts Mutual Life Insurance Company New York Life Northwestern Mutual Life All of them have scores of 99 or higher out of 100 on the Comdex rating system (which means they are financially stable, strong companies.). Last I knew, MassMutual had not missed a dividend payment since 1851 (155 years.) I think New York Life has a similar record. I don't know for sure about Northwestern Mutual. All that said, while I believe it is a great idea for you to buy whole life while you are young, if your goal is to have an investment other options should be considered as well. Money Market accounts, ten year government bonds and other such options can proovide safe ways to sock away some cash. Higher yields will tend to require you put your money in higher risk vehicles, like mutual funds or high yield corporate bonds. Your time horizon is long enough that a market investment may be a viable option. Consult someone local, in person, and do a thorough needs analysis and risk tolerance assessment and learn from what that person does. It will help you understand the process. Choose someone who is not beholden to selling a particular company's products so the input will be as objective as possible. Do some reading. I know it sounds campy, but the Investing for Dummies book is actually not bad.

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Answer 4

I think we can pretty much scratch life insurance off the list. Although some policies do have a cash out value after some years, the policies are designed to give a return to the insurance company rather than the insured.

So the choice is between sotcks and real estate. Both have their pluses and minuses. The biggest minus with real estate is the maintenance, illiquidity, and taxes. The big minuses with stocks are they are investments in companies that very likely are mismanged by thieving CEOs. So pick your poison.

Answer 5

Financial experts say mutual funds are the best long term investment. Mutual funds are professionally managed, affordable, diversified, and easily liquidable. Investors should carefully check the prospectus before investing into a mutual fund. There are many out there and only a few of them can match your objective. Mutual funds have perform an average rate of return of 12% in the past 25 years.

Stocks are very risky investments and you take full risk on how your portfolio should perform. You need to constantly follow company earnings and reports and decide when to buy and when to sell. Rate of return is depended on how you invest it.

Real estate have perform an average rate of return between 5-8% in the past 25 years. I would consider this a conservative investment. They are not the best way to invest, but its good to have if you want to keep your portfolio diversified.

Life insurance policies are not investments, according the SEC. They are cash value or savings. Rate of return on cash value has been around 3-5% over a 20 year period. I say over a 20 year period because thats how long the insured needs to keep to earn that 3-5%. If they insured cancels the policy before that, its definetly less than 3%. In cash value life policies, no cash value is built up in the first two years. If you ever wanted to use the cash value, you have to borrow it and pay a monthly interest. Its just like a loan. Nobody knows this unless they have read their life policy. If you live to age 98, you get to keep all the cash value, but lose the death benefit because your policy expires at age 98. If you die before age 98, you lose all cash value, but your beneficiary gets the death benefit.

So, if you are considered investing for long term, I would invest in mutual funds. I would put them in tax-deferred accounts such as a Roth IRA. For college plans, I would put them into 529 Plans. If you don't have a IRA, you should start one up. Even if you have a 401k at work. Eventually, you will have to move the 401k into an IRA at age 59 1/2 or when you quit the job.

Answer 6

I guess if it was up to me, I'll use my money to buy a decent house somewhere safe and peaceful. Then I'll wait for a few years for the price to go up. Then I'll renovate it to look and feel the best. After that I'll resell the house at bigger profit margin.

Stocks - it's tough to observe and analyze which company's the best or which company's share prices will rise. You might want to spend your time on something else simpler that require less time to master.

Investment-linked insurance - you can forget it. If you want to, buy only term insurance and invest the rest in mutual funds. Term insurance is the cheapest insurance. Investment-linked is just there to tempt you to put away your money for the insurance company to profit. The return will never be higher than mutual funds.

Answer 7

Property has a cycle of up and downs. I have doubled and more all my investments since 1984 or so.

Answer 8

Stocks.