The Performance Of Different Asset Classes & The Appropriate Use Of Life Insurance In Financial Planning

In this episode of the podcast, certified financial planner Chad Burton provides insights and analysis on various financial topics. The episode begins with a discussion on the current state of the market, focusing on the S&P 500 and NASDAQ indexes. Burton explains the composition of these indexes and highlights the dominance of tech stocks in their performance. He also emphasizes the importance of diversification in building portfolios and cautions against solely relying on large-cap growth stocks.

Burton then delves into the performance of different asset classes, including emerging markets, international developed markets, small-cap and mid-cap stocks, and real estate. He compares their returns for the year and provides context by examining their performance since January 2022. He notes that while large-cap growth stocks have seen significant gains this year, other asset classes are still down from their January 2022 levels, presenting potential opportunities for investors.

The discussion shifts to fixed income investments, particularly bonds. Burton highlights the attractive yields currently available in the bond market and suggests considering options such as corporate bond ladders and treasury ladders. He explains how these strategies can provide consistent cash flow and potential capital appreciation if interest rates decline in the future.

In the latter part of the episode, Burton addresses the topic of life insurance. He clarifies his stance on life insurance, stating that he supports its use when appropriate, such as for protecting families, funding buy-sell agreements, and addressing estate planning needs. However, he cautions against using life insurance as a blanket investment and emphasizes the importance of prioritizing other retirement savings options, such as maxing out 401(k) contributions and Roth IRAs, before considering cash value life insurance policies.

Burton concludes the episode by providing a formula for determining life insurance coverage based on income, number of children, and outstanding debts. He also discusses specific scenarios where life insurance can be beneficial, such as second marriages, key person insurance for businesses, and estate tax planning.

Overall, this episode offers valuable insights into the current market conditions, the performance of different asset classes, and the appropriate use of life insurance in financial planning. Chad Burton's expertise as a certified financial planner shines through as he provides practical advice and guidance for listeners.

Timestamps:

[00:01:15] S&P 500 and NASDAQ components.

[00:04:09] Asset class performance

[00:07:26] Tech stocks performance.

[00:12:31] Small cap value opportunities.

[00:15:21] REITs and their decline.

[00:19:18] Earnings growth in the S&P 500.

[00:23:11] Bonds creating stock market competition.

[00:27:48] The stock market and bonds.

[00:30:42] Buy term and invest.

[00:35:40] Long-term care insurance tax.

[00:39:08] Estate tax and life insurance.

[00:41:12] The downsides of life insurance.

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