Many advisors focus on the internal rate of return when analyzing a policy, but it neglects the whole truth. So what’s the difference between IRR and ROR, and why does it matter?
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7 Ways To Use The Death Benefit
In this recent presentation, Truth Concepts™ did for The National Network of Estate Planning Attorneys we demonstrate how to determine the rate of return on the cash value of a policy as well as take you through the 7 ways to use the death benefit. This is also a good tutorial on the use of the Funding, Diversification and Distribution calculators.
Read MoreAverage Does Not Equal Actual
Average Rates of Return are often touted by financial experts, and yet simple math can show us that Average does not equal Actual. Pretend that you invested $100,000 into a mutual fund that had promised an average rate of return of 25% if you left the money alone for 2 years. In the first year it earned 100%. After the first year, the investment would look like this: In the second year, the fund earned -50% (that is a negative 50%) and so now your investment looks like this: While your
Read MoreCalculating Internal Rate of Return
How do you calculate the internal rate of return on an investment when the cash flows vary and you can’t use a typical financial calculator that only functions with the same stream of payments, not a varying stream? For example, you invest in an oil well where you contribute $100,000 the first year and the second year there is a $20,000 capital call (meaning you contribute $20,000 more). Then in the third year, there wasn’t any income but starting in the fourth year, you received the following stream, $30,000, $25,000,
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