The Bull Hunters Guide

In last weeks edition, we were on the topic of Futures Contracts and recently, this blog has centered around the idea of introducing the reader to many different types of investing. The central idea here was that by doing so, we could begin to dispel the notions of investing being a “professional’s game” that all too often prevent people like you and I from doing wise things with our money. By looking at these topics, we can hopefully get a better idea of how to invest wisely, in any given scenario.

What Is Life Insurance Exactly?

Life insurance is a type of investment that differs wildly from every other type of investment we’ve covered so far. Namely, it’s the one type of investment where you’re guaranteed to never personally see the payoff. However, as every good investor knows, making money is only part of the point of investing. It’s also about preparing for the future and making a better life for our families. It’s in this area that life insurance is seen as a popular investment.

Life insurance is basically a type of income protection for your family that kicks in in the event of your untimely death. After you die, you’re obviously no longer drawing an income. However, the bills in your name, including mortgages aren’t just written off; you’re still accountable for them. If you’re not around, your family will shoulder the blame. Therefore, people buy life insurance policies so that their families will receive an amount of money upon their passing that will help them deal with these financial adversities.

Payout Decreases Over Time

The only real risk to purchasing life insurance is that if you’re fortunate enough to live a long life, the reward payout will decrease over time. Financially speaking, it’s a better investment if you die early, as morbid as that sounds.

Life insurance can be purchased from a variety of dedicated companies, all of which are carefully regulated and supported by the government, making for a very safe and secure investment.

See you next week for part 8 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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I hope you enjoyed last weeks post on Corporate Bonds. This week, we’re going to expand our discussion of alternate investment strategies to discuss futures contracts. This is an important topic to discuss because futures is one area where investors are particularly reluctant to tread, feeling that the process is “too advanced” for them, or that futures carry too high a risk.

Futures Can Be Risky

This is largely a misconception. Futures Contracts can indeed be risky, but if they are used wisely, they can also be used to guard against excessive risks! Let’s look at it this way. Suppose that you were to buy a futures contract on a stock for one year from today at $5 a share.

When the day comes, if the stock is valued under $5 a share, then you’re stuck with purchasing them and will have to suffer the loss. However, there’s also a chance that the stock could be valued at more than $5 a share, and you would have the unique opportunity to purchase it at a discount.

Minimizing this risk

In order to minimize risk on a futures contract, you need to understand the difference between hedging a risk and speculating. When you purchase a futures contract, or sell one, with the intention of minimizing a downside risk by locking in the current price on a particular commodity, then you are making a very common and wise use of the futures contract.

On the other hand, if you’re buying on the speculation that the commodity will soon soar and make you rich, then you’re taking quite a gamble. As you can see, futures can be an excellent source of investment, but it does require some thorough knowledge of the market before hand. However, if you possess that experience, you should not be unduly reluctant.

If you take the notion to purchase a futures contract, note that it can be done through most full service brokers. These same stock brokers can get you involved in futures trading, which is essentially the same concept, but applied to the trading that you’re already familiar with.

See you next week for part 7 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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