My husband and I have been advised to buy a significant amount of whole life insurance as a safe way to invest. We have just started our family and I am a little wary. I am not really sure I understand why it would be better to do this than to invest in bonds, annuities, etc. Any ideas? answers?

Answered by “Joe”

Whole Life insurance is one way of investing your money, but it’s not the only way. Most safe retirement portfolios will have diverse investments. You should have anywhere from 5-7 different investments. By doing this you’ll avoid putting all your eggs in one basket.

Think of investing like a table. The more legs that are under that table the stronger it’s going to be and the harder it will become to tip over. By investing in different things like insurance, real estate, stocks, mutual funds, etc, you’ll have a diverse portfolio that will provide security in the event of one or two of your investments going bad.

Whenever you get ready to invest your money you should always determine how long it will take for your money to “mature”. Money matures when the accrued interest causes it to double. You need to find out how many years this will take at the interest rate being offered to you in order to determine if it’s a good deal or not. You can find this out by using the “Rule Of 72″.

The Rule Of 72 is really very simple. You simply divide the number 72 by whatever the interest rate is. Here’s an example. Let’s say you are considering buying a Whole Life insurance policy that offers 4% interest. This means that it will take 18 years for your money to mature at 4% interest. It doesn’t matter how much the amount is.

Don’t let a salesman be in control of your financial future. Whole life is not a bad deal, but you shouldn’t plan on using it as your only investment. My advice is to hire a reputable financial adviser and learn to diversify.