Avoid Modern Financial Products

January 18, 2017 by Jason Smith

Financial companies create financial products for only one reason, to make a profit.

The only way these products will continue to be sold is if the companies who sell them continue to make a profit. For them to make a profit they need to get someone to give up their money.

Do I think there is a conspiracy against the middle and lower class by companies, executives, and business owners? Of course not. But I also do not believe there is any worthwhile effort to prevent people from spending to the point of being financially harmful. It is like cigarette companies. First they hid harmful evidence and then even after getting sued they still turned a profit and continue to sell a harmful product. It simply pays to not give a crap.

These products are designed to make millionaires out of executives at your expense.
O% Down Mortgage, Interest Only Mortgages, Reverse Mortgages, Payment Protection Policies, Department Store Credit Cards, High Fee Mutual Funds, Whole Life Insurance, Universal Life Insurance, Variable Life Insurance, Prepaid Debit Cards, Payday Loans,

Extended Warranties

Cell Phone Insurance (In 15 years of using a cell phone I have yet to get rid of one because it did not work. Even my teenage son has only had 1 stop working.)

Annuities

The worst thing about annuities in my opinion is that you immediately lose your initial purchase price2. If you purchase a $100,000 dollar annuity that $100,000 is gone. This means if an annuity claims a 5% return at the end of the year you would have $5,000. Compare this to investing in a mutual fund that returns 5%. Which at the end of the year you would have $105,000. This means you spend the first years just earning back your initial purchase amount. At 5% this will take 20 years.
In the meantime many people call the annuity an investment. It is a product you purchase not an investment.

References

1-Top 10 Worst Financial Products Ever
2-Buying an annuity begins with the immediate loss of 100% of your original investment.