When the average person is looking at how to create or diversify financial portfolios, they may be easily overwhelmed because the only experience they have is from what they learned from watching “Wolf of Wall Street.”
There are many terms that can at first be difficult to understand, but luckily there are additional ways to gather accidental life insurance quotes to successfully diversify your finances. Keep reading to find out the top ways on how to creatively use life insurance to diversify your portfolio.
The Basics of Insurance
It’s okay to have to start at the foundation even if you think you already know the basics. Life insurance, like any other form of insurance, is financial security in case of an emergency. You may be thinking, “What does my financial portfolio matter once I’m gone?”
Understanding and getting a comprehensive life insurance plan is a complete protection plan for all of your assets you build throughout your life, so don’t disregard this step when speaking with any of your financial advisors.
Building Blocks of Life Insurance
We all need life insurance because the fact is that none of us make it out of life alive, but that doesn’t mean that life insurance policies are “one size fits all.” There are three different forms of life insurance that you should research to find out which will work the best for you and your family.
Term Life Insurance: the “Start-Up” Policy
Term life insurance covers you for a set amount of time, and some policies even offer premiums that never increase. This option is the most affordable and can cover just about anyone from 18 years old to 88 years of age.
Most companies offer this policy with options to be converted to whole life with some additional policy features.
Whole Life Insurance: the “Mid-Life Not in Crisis” Policy
Whole life insurance covers you for your entire life so there is no need to change your policy once you start it. This policy can earn you dividends, which equals cash you can use while you’re here.
This type of policy builds cash value that’s guaranteed to grow over time even in down market times, and it lets you use your policy’s cash value for anything, anytime.
Universal Life Insurance: the “I’m Captain Now” Policy
Universal life insurance policies include many of the same benefits as whole life. These policies cover you for life and build cash value over time. Universal life insurance offers the most flexibility to change your coverage amounts, and it gives you control over when and how much you pay.
All of the above life insurance options are good options. The most important thing is that you’re insured. Even if you have built a six-figure empire for you and your family, have paid off your debt, and are now living the American dream . . . not having life insurance can unravel a lifetime of hard work.
The Basics of Investing
Ten dollar stocks are great starting points when you are looking to start investing, but choosing companies that just sound different doesn’t necessarily give you a diverse portfolio or even a profit.
To really achieve a diversified portfolio means you are looking for asset stages that have low or negative correlations to each other. This means that if one of your assets or stocks moves down in their current value, the other stocks will counteract that decrease.
Having assets with this type of correlation to each other make your portfolio diversified while also not taking on too many risks that could overwhelm your possibility of generating profits.
Invest in What You Know
Do you get Starbucks every morning, are you a regular at a nationally known gym, or do you consider any kind of business as a part of your lifestyle? If the answer to these questions is yes, you have a good place to start investing.
Start where you’re comfortable and with the business that you already know.
If you have a financial advisor, they may warn you against only investing in what you know because when we think about what we love, too much reliance on the retail market can be created. However, the goal here is to have a place to start and grow.
A well-rounded portfolio will have around 15-30 various types of investments, so picking two retailed brands that you love is a safe bet. The most important thing to remember here is you don’t want to put all your eggs in the retail basket.
Your 401K isn’t the Only Way
Have you heard of dollar-cost averaging? Dollar-cost averaging is a way for investors and entrepreneurs to grow assets over a long period. Similar to investing in a 401k from a job, dollar-cost averaging breaks up one large investment amount into multiple small parts — quite literally spreading your wealth.
The biggest reason to invest in the dollar-cost averaging format is to keep from making large poorly-timed investments like whoever invested in Regal Movie Theaters at the start of 2020. Can you imagine how they’re feeling right about now?
Mutual Funds for Mutual Benefits
In unprecedented times like 2020, when bear markets are forgetting to hibernate, mutual funds and exchange-traded funds (ETFs) are easy forms of investment that will diversify your portfolio while helping keep your assets protected. Another type of investing you may have heard of is susu mutual funds which work very similarly with multiple people coming together.
Working with others can provide a higher turnout for your investment since your investment is multiplied by however many other investors pool with you. Not to mention having more eyes on the investment can mean having more help in making the investment choices.
Exchange-traded funds are great when looking to expand investments internationally. A popular form of ETF investment is Asset Allocation because they can start as low as fifty dollars per month which makes this strategy easier and cheaper than leasing a car.
The main differences between ETFs and mutual funds are that mutual funds are not traded on an exchange. Mutual funds trade once per day after the markets close while ETFs are traded 24/7. ETFs tend to be more cost-effective and more liquid when compared to mutual funds.
These aspects of ETFs can be easier for new investors when building their portfolio; however, this also means that they require more monitoring.
Be the Wolf, Not the Sheep
There’s nothing quite like a global pandemic to get you thinking about how to better secure and better yet grow your finances. We all try to gauge our personal risks when taking on new financial assets and responsibilities. During trying times, our willingness to take on risks usually tends to decrease, but diversifying your portfolio is a great risk to take under the right guidance.
When looking to expand, be aggressive at every step. Make sure you fully comprehend not only what you’re investing in but also how you’re investing. The different investment ways all have pros and cons but you should tailor your financial and investment portfolios to fit your life as best as possible.
Take advice and follow in other people’s footsteps with caution, and make investment decisions smart and fun. Maybe someday, you’ll star in your own cool movie about making it big while diversifying your portfolio.
Danielle Beck-Hunter writes and researches for the life insurance comparison site, QuickQuote.com.