Episode #36: The Listener Q&A Show

Listener Q&A

August 18th, 2020

What is whole life insurance? Should you invest outside of a work-funded retirement plan? How will the election influence the stock market? The questions have been rolling in! So in this episode of Making Finance Fun, I finally give you some answers. If these are some of the questions that have been on your mind—give it a listen!

Outline of This Episode

  • [0:52] A listener Q&A Show
  • [4:11] Question #1: What do you think about whole life insurance?
  • [16:25] Question #2: Should I invest outside my retirement plan at work?
  • [18:53] Question #3: When is Apple stock going to split?
  • [24:55] Question #4: Are we going to get another round of stimulus checks?
  • [27:09] Question #5: How will the election influence the stock market? 
  • [29:49] Question #6: My *Certain to be wrong* predictions

Just what is whole life insurance?

What is whole life insurance? According to Investopedia, “Whole life insurance provides coverage for the life of the insured. In addition to paying a death benefit, whole life insurance also contains a savings component in which cash value may accumulate. These policies are also known as “permanent” or “traditional” life insurance.” 

To restate the obvious: Life insurance is an insurance policy on your life. You take out life insurance to take care of dependents or family members who depend on your income to survive. If you pass away, a sum of money would be disbursed to those people.

With whole life insurance, you have to keep the premium payments going and it is designed to last your entire life. Whereas term life insurance policy is designed for a length of 5, 10, 15 years, etc. Let’s define some important terms: 

  • Cash Value: This is the money you pay into life insurance. It is similar to a savings account. If you pay $100 a month for the policy, part of it goes into “savings.” It will earn interest and grow. You can also take a loan against your cash value, which is used as collateral. 
  • Death benefit: This is the amount of money that goes to someone if you die.

My opinion is that whole life insurance is an expensive life insurance policy. The premiums are higher than term life policies. On the flip-side, once a term life insurance policy terms, it’s gone. So a whole life insurance policy could be a good idea in some situations—but it depends on your circumstances.

The one benefit is that it does act as a savings account for you that can be invested and used in retirement as income. They’re sold as an investment vehicle. In my opinion—it’s not necessarily the best vehicle to save for retirement. To hear question #2—and my answer—keep listening! 

Apple’s impending stock split: What does it mean? 

As of August 31st, Apple stock is going to do a 4-for-1 stock split. But what is a stock split? A stock split is “When a company divides the existing shares of its stock into multiple new shares to boost the stock’s liquidity. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split does not add any real value.”

For every share you have, you’ll get four. So each share—according to today’s value—will go from $450 down to $112 a share. Technically speaking, the split doesn’t add any real value. There is no immediate value added to the stock itself. If you want to invest $10,000 in Apple before the split, you’re still investing the same amount. You just get more shares. However, if you’re planning to hold stock for a long time, a split can benefit you. 

Why do companies split their stock? To lower the trading price of the stock and increase liquidity. People are simply more comfortable buying stock at a lower price per share. Up until recently, you had to buy a whole share of a stock. Some institutions now allow you to purchase a fraction of a share. Keep listening as I answer questions about how the election will influence the market and share my thoughts on another round of stimulus checks

My *100% Certain to be wrong* predictions

Just for fun—because this podcast is all about making finance fun—I’m going to throw out some stock predictions. Please note this is NOT actionable advice, just my thoughts on what the market could do—and likely 100% wrong.

  • The Dow Jones is currently around 28,000. My prediction is…
  • My Apple stock prediction.
    • My Caterpillar stock prediction.
    • My RLI stock prediction. 
    • My Tesla stock prediction.
    • My Amazon stock prediction. 
    • My Disney stock prediction. 

I’ll track these predictions throughout the rest of the year and see where we land in 2021. What do you think these stocks will do? Let me know—I’d love to hear your thoughts! 

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