With the market being up and down, one of the questions we hear all the time is: “what should I be investing in?”
If you turn on the T.V, you’ll likely those pearly white teeth of Suze Orman (or someone like her). She is considered a “perfect 10″ by many folks, and even some T.V. personalities (Oprah loves her apparently). And, what does Suze advise us to do with our money? Essentially, we are told to “buy term and invest the difference”. In other words, buy term insurance and invest in mutual funds.
What does Suze do with her money? In an interview with the NY Times (with Deborah Solomon), she estimated her liquid net worth at roughly $25 million. Out of that, 4% is invested in the stock market. What about the rest? Suze herself tells us:
Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100% safe and sound.
Who else invests in zero coupon bonds? Why, life insurance companies do, of course. Life insurers love zero coupon bonds because of the bond’s high duration. Bonds tend to be very stable, and thus good investments. Insurance companies use them, obviously, as long-term investments.
When an individual buys a whole life insurance policy, they are getting two things: the death benefit (insurance), and the cash value plus company dividends (the guarantee of the underlying bonds in the life insurer’s general portfolio plus dividends).
So, Suze is OK with the safety of these bonds, but doesn’t want the death benefit associated with an insurance policy. That’s fine, but as a respected authority, I think she should at least be willing to tell her followers that she follows the same path as almost every life insurance company out there.
The difference being that if you are part of the working class, you could place a large portion of your money into a good whole life or fixed universal life insurance policy and – if you have structured everything properly – have the money and the death benefit and be better for it in the long-term.
Once you have a savings built up, you can buy real estate, like Suze. It’s strange how some financial advisors tell their clients to do one thing, while they themselves do something completely different. Do you trust your financial advisor? Are they practicing what they preach?
_________________________This entry was posted on January 10th, 2012 by David C Lewis, RFC. Edits may have been made to keep this entry current. · 4 Comments · Budgeting & Money Management, Insurance & Savings
I am glad you mentioned Suze Orman. When I watch her on T.V., I can not figure out what she is talking about. I have experience dealing with retirement plans and mutual funds but it is still difficult to relate to her.
Suze has enough money to put her savings in safe havens instead of the stock market with mutual funds. The majority of people can not or will not do what she does because there is the average person then there is Suze who does not face what everyone else faces.
Suzie is a bright business woman and she does care about the money of others.
She is a entertainer and gives investment advice but she is not a 401k Planner or Advisor.
Isn’t Suze Orman like…known to be crazy? Everyone I’ve talked to seems to know who she is, but they all describe as that one crazy chick…weird, eh? I’m not trying to trash her…she obviously knows her stuff, but…yea.
I don’t know if she’s crazy, but she certainly paints everyone with the same brush. At least, this is what I’ve noticed. She also comes across as very authoritarian which I disagree with.