I got a bottle of Maker’s Mark as a wedding gift. That’s old Kentucky Bourbon. The thing that makes it old is 2 things, really.
First, it’s fermented with 150 year old yeast. Secondly, it sits in a barrel for a very long time.
You can’t make whisky very quickly. And, if you wanted to start your own distillery today, your product probably wouldn’t be ready for at least 5 years and probably more like 10. The best whiskey is between 25 and 50 years old.
You don’t drink it to get drunk. You drink it because it tastes good.
Some things cannot be done better than the original. Sometimes, fresh isn’t best. New isn’t good. And sometimes, you can’t beat the old timers at their own game because they have more time in the game than you ever will.
This is exactly what confuses so many professional investors and startup financial services companies about whole life insurance.
So, they ignore it or try to beat the insurance company at its own game.
But… an insurance company’s investment portfolio is “aged”. It can’t be easily replicated without a sh*t ton of money and time. Time being one of the more important factors. You simply cannot replicate an insurer’s investment portfolio without at least 10 years of systematic portfolio construction.
That’s when the “aging” begins… after 10 years of set up and preparation.
Startup life insurance companies are nearly always volatile. Many of the insurance companies that started in the 1800s went out of business. The ones that survived learned a lot from the experience, and that experience became baked into the fabric of the company and passed down through generations of management teams.
Which is why I find the flippant attitude of “I can beat the insurance company at its own game and save myself the expense lol!” so amusing.
Good luck, Chuckles.
I mean, OK, technically, yes you can do it… if you’re willing to become an insurance company. Like… hire an actuary to design an investment portfolio for you, and make investments similar to an insurance company. Then, maybe, you could beat them at their own game.
Or… go back in time and do what Warren Buffett did with his insurance company (which is impossible to do today because of various regulations).
Of course, you don’t have to torture yourself trying to replicate what an insurer does. If you want a safe, stable, predictable savings and insurance plan, just plug into the existing system.