Suze Orman Advises Against Investing in Products You Don’t Understand: People Ignoring Warning and Investing Anyway

Suze Orman Advises Against Investing in Products You Don’t Understand: People Ignoring Warning and Investing Anyway

Renowned financial advisor Suze Orman shared a key insight on his podcast: the crucial importance of fully understanding financial products before investing.

“It’s better to do nothing than something you don’t understand,” she says.

Orman is concerned about a trend where individuals invest in complex life insurance policies – such as whole, universal and variable life insurance – without fully understanding the consequences. She has observed an increase in auditor inquiries regarding life insurance policies, indicating a broader lack of understanding of these financial products.

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Orman explains that life insurance is generally aimed at young people who have not yet built up substantial assets and who have dependents. However, the need for such insurance diminishes as your financial situation improves with age. Despite this, many people are seduced by the attractive, although misleading, idea of ​​simultaneously benefiting from an investment and life insurance.

Orman uses detailed examples to highlight the downsides of these investments, including cases where people were misled about the returns they could expect. She notes that optimistic projections offered by insurance agents often do not match guaranteed results, presenting a risk of financial loss.

“An insurance agent tells you you can have the cake and eat it too,” she said. ” You can not. It is physically impossible to have it both ways.”

Americans purchase life insurance for reasons such as burial expenses, wealth transfer, income replacement, retirement income supplement, and mortgage payment coverage. These factors highlight the need to choose a policy that fits your financial strategy. The cost of similar policies varying up to 39.6% between companiesand women generally pay less than men, shopping around for the best rate is crucial.

The challenge of making informed decisions is further complicated by the general lack of insurance knowledge. A study exploring the impact of insurance knowledge on personal insurance decisions found that insurance knowledge directly influences consumers’ purchasing decisions, mediated by factors such as trust, perceived benefits and attitudes toward insurance. This finding suggests that better insurance knowledge could lead to better financial outcomes for consumers.

Tendency : How to turn a $100,000 investment into $1 million – and retire as a millionaire.

However, a gap remains in the public’s understanding of insurance products, with financial literacy not necessarily translating into insurance culture. This disconnect indicates the need for more specialized education and resources to help consumers choose among complex insurance options.

At the heart of Orman’s advice is a powerful message: Don’t be swayed by headlines or friends’ get-rich-quick stories when it comes to your finances. This is especially true when it comes to complex financial products and ever-changing markets.

Take cryptocurrency, for example. Although it may be tempting to intervene because it is a hot topic, a lack of understanding can result in significant losses. Orman emphasizes informed decision-making in all financial activities, not just insurance. She urges her audience to seek transparency and choose investments they can understand, ensuring they make choices aligned with their goals and risk tolerance.

The route of DIY investing is tempting these days, with information readily available, but consult a qualified financial advisor is a smart decision. Advisors act as expert guides and help you navigate complex products, assess your risk tolerance and develop a personalized financial plan. They do not replace the importance of understanding your options, but they do provide a valuable level of professional advice. Think of it as an investment in your financial future: an advisor can ensure your journey stays on track to achieve your long-term goals.

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*This information does not constitute financial advice, and personalized advice from a financial advisor is recommended to make informed decisions.

Jeannine Mancini has written about personal finance and investing for the past 13 years for various publications, including Zacks, The Nest, and eHow. She is not a licensed financial advisor and the content herein is for information purposes only and does not constitute and does not constitute or intend to constitute investment advice or investment service. investment. Although Mancini believes that the information contained herein is reliable and has been obtained from reliable sources, there are no representations, warranties or undertakings, stated or implied, as to the accuracy or completeness of the information.

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This item Suze Orman Says, “It’s Better to Do Nothing Than Something You Don’t Understand” — People Invest in That Product They Don’t Understand originally appeared on Benzinga.com

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