Well-known financial adviser Suze Orman shared an essential insight on her podcast: the critical importance of fully understanding financial products before investing.
“It’s better to do nothing than something you don’t understand,” she said.
Orman raises concerns about a trend where individuals are investing in complex life insurance policies — such as whole, universal and variable life insurance — without a complete grasp of the consequences. She has observed an increase in listener inquiries about life insurance policies, indicating a broader lack of understanding of these financial products.
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Orman explains that life insurance is generally aimed at younger people who have not yet built substantial wealth and have dependents. However, the need for such insurance decreases as your financial situation improves with age. Despite this, many are enticed by the appealing, though misleading, idea of benefiting from an investment and life insurance simultaneously.
Orman uses detailed examples to point out the drawbacks of these investments, including instances where people were misled about the returns they could expect. She notes that the optimistic projections offered by insurance agents often fail to match guaranteed outcomes, posing a risk of financial loss.
“You are being told by some insurance agent that you can have your cake and eat it, too,” she said. “You cannot. It is physically impossible to have your cake and eat it, too.”
Americans buy life insurance for reasons such as burial expenses, wealth transfer, income replacement, supplementing retirement income and covering mortgage payments. These factors emphasize the necessity of choosing a policy that fits your financial strategy. With the cost of similar policies varying by up to 39.6% between companies, and women generally paying less than men, it’s crucial to shop around for the best rate.
The challenge of making informed decisions is further complicated by a general lack of insurance literacy. A study exploring the impact of insurance literacy on personal insurance decisions found that insurance literacy directly influences consumers’ purchasing decisions, mediated by factors such as trust, perceived benefits and attitudes toward insurance. This finding suggests that enhancing insurance literacy could lead to better financial outcomes for consumers.
Trending: How to turn a $100,000 investment into $1 million — andretire a millionaire.
However, a gap remains in the public’s understanding of insurance products, with financial literacy not necessarily translating into insurance literacy. This disconnect indicates a need for more specialized education and resources to help consumers choose from complex insurance options.
At the core of Orman’s counsel is a powerful message: Don’t be swayed by headlines or friends’ get-rich-quick stories when it comes to your finances. This is especially true in regard to complex financial products and ever-shifting markets.
Take cryptocurrency, for example. While it may be tempting to jump in because it’s the hot topic, a lack of understanding can lead to significant losses. Orman emphasizes informed decision-making across all financial endeavors, not just insurance. She urges her audience to seek transparency and choose investments they can understand, ensuring they are making choices aligned with their goals and risk tolerance.
The do-it-yourself investment route is tempting these days, with information readily available, but consulting a qualified financial adviser is a smart move. Advisers act as expert guides, helping you navigate complex products, assess your risk tolerance and craft a personalized financial plan. They don’t replace the importance of understanding your options, but they provide a valuable layer of professional guidance. Think of it as an investment in your financial future — an adviser can ensure your journey stays on track to achieve your long-term goals.
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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.
Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.
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TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
