Why Tier 1 Assets Help Mitigate Risk

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investmentRisk is derived from the things that are beyond our control. However, no investment is without risk, and at the foundation of any good strategy you’ll find the mitigation of risk.

The traditional way to mitigate risk in an investment portfolio is with the theory of asset allocation and diversification.

A Mutual Fund account for a typical investor might have several different funds. His capital may be invested into hundreds of different companies. If the “investor” has no idea what they are doing then some diversification might make sense. But what if we all “invested” a little more of our time and focused on a few really good investments?  This would allow us to become more educated in a very specific way which provides us with an elevated level of control.

Control helps mitigate risk.

If we peer into the banking model we’ll find different tiers of assets.  The lower the tier the lower the risk.  We can relate it to a pyramid. The Tier 1 assets would be considered the foundation which would carry very little, if any risk.  And just like building a pyramid the bank must start at the foundation. We can model our personal financial system after the banking model.  Once we have our foundation built then we can take on a little more risk and move into the higher tiered assets.

Cash Value Life Insurance is part of the Tier 1 asset class

The Cash Value in a properly structured whole life policy provides the foundation needed for your financial pyramid. It provides CONTROL.

Whole Life insurance is not an investment.  It is a tool that allows you to optimize your investments. A powerful advantage of a Whole Life policy is the loan provision. This provision gives you the ability to leverage your cash value and use the loan proceeds from the insurance company to invest in other performing assets.  The beauty is that the cash value is left uninterrupted in your policy. It continues to grow year in and year out. You don’t have to take any risk in order to get the growth.

To learn more about the many benefits of this multi-faceted tool, visit Resources at Paradigm Life.

Nate Butler

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