It’s not a matter of whether life insurance is better than investing in stocks and mutual funds, but rather which investment option is better suited for your financial goals and circumstances.
Life insurance provides financial protection for your loved ones in case of your untimely death, and it can offer a guaranteed return on investment in the form of a death benefit or guaranteed downside protection from Whole Life and Indexed Universal Life (IUL) products. The whole-life policies give guaranteed interests of 3-4% per year irrespective of the market conditions whereas IUL gives a floor of 0% (or 0.75% based on the carrier) and grows with Index funds like SP500 without actually being invested in the market.
Investing in stocks and mutual funds can offer the potential for higher returns over the long term, but it also comes with higher risks. The stock market can be volatile, and there’s no guarantee that your investments will perform well. However, if you’re willing to accept the risks and have a long-term investment horizon, stocks, and mutual funds can be good options to grow your wealth over time.
A good illustration from Nationwide Financials comparing various asset classes’ risk vs returns.
Ultimately, the decision between life insurance and investing in stocks and mutual funds depends on your financial goals, risk tolerance, and time horizon. It’s important to do your research and speak with a financial advisor before making any investment decisions.