I just received a question from one of my favourite clients.

“What do you recommend, buying stocks or putting more money into my insurance funds?”

While I like to give a straight, yes or no, or this or that answer, it’s not that simple.

The decision to put more money into a life insurance fund or buy stocks depends on your financial goals, risk tolerance, and overall financial situation. There are many questions to ask. To list a few;

What is your risk tolerance?

What is your expertise or knowledge of trading stocks/ equities?

What is your time horizon? (Are you looking at short term or long term goals?)

Here are some considerations for both options:

Investing in a Life Insurance Fund:

1. Protection: Life insurance primarily serves as a financial safety net for your beneficiaries in case you pass away. It provides a death benefit that can help replace your income, pay off debts, and cover living expenses for your loved ones.
2. Guaranteed Benefits: Some permanent life insurance policies offer guaranteed cash values and a guaranteed death benefit. This can provide a level of financial security.
3. Tax Benefits: Life insurance policies often come with tax advantages. The death benefit is typically tax-free, and the cash value can grow tax-deferred.
4. Risk Aversion: If you’re risk-averse and prioritize financial security for your loved ones, life insurance may be a suitable option.

Investing in Stocks:

1. Wealth Building: Investing in stocks can provide an opportunity for long-term wealth accumulation. Historically, stocks have offered higher returns compared to many other investments.
2. Liquidity: Stocks are generally more liquid than life insurance policies. You can buy and sell them easily, providing access to funds in case of emergencies or opportunities.
3. Diversification: Investing in a diversified portfolio of stocks can spread risk and potentially provide more stable returns over time.
4. Risk and Volatility: Stocks come with the risk of market fluctuations and volatility. Your investments can go up or down, and there is no guarantee of returns.
5. Long-Term Perspective: Investing in stocks should typically be done with a long-term perspective. Short-term market fluctuations should not deter you if you’re investing for the long haul.

Ultimately, your decision should be based on your specific financial goals and risk tolerance. It’s not an either-or choice, and many individuals choose to have a mix of both life insurance and investments in stocks. Life insurance provides protection and peace of mind, while stocks can be a valuable tool for wealth accumulation and financial growth.

It also depends on what type of market we are currently in. When stocks/ equities are in a volatile market it may be time to put money is something more secure and watch to see which way the market is going. Then again, if you’re sitting on the sidelines, you are not part of any action and therefore will see no results. That’s why I don’t recommend keeping money in any account that doesn’t earn interest. It is actually losing value vs inflation.

As they say, “A boat may be safe in the harbour, but that is not what boats are for. (And eventually it’s hull will rot out.)” Money is meant to be moved, spent, invested, not just sit under your mattress. That’s why the word “Currency,” stems from the word “Current,” meaning to flow. Money needs to “flow.”

Either way, I recommend consulting with a financial advisor, (I’m happy to speak with you,) to assess your unique circumstances and help you make the best decision for your financial situation and goals. They can provide personalized guidance based on your needs and objectives.

Happy investing!