Question:
What do you make of the breakdown in the merger of Newmont Mining and Barrick Gold? What does this insinuate about the price of gold?
Answer:
We believe gold will remain volatile. Both Newmont Mining Corp. (NYSE: NEM) and Barrick Gold Corp. (NYSE: ABX) are huge companies in the gold production space. However, instead of merging their efficiencies, in our opinion, they didn’t understand their own business enough to acquire one another. Looking at their earnings reports, both companies are shedding capacity. They are in no way going to take on more with a merger. We do not recommend investing in gold, if you were to, and we recommend avoiding these two companies.
Question:
What are the pros and cons of buying life insurance through my employer rather than buying my own policy?
Answer:
Many companies offer their workers employer-sponsored life insurance coverage as part of their employee benefits package. If you are offered this opportunity, it is probably in your best interest to accept. Buying life insurance through your employer can be a relatively inexpensive and hassle-free way to get some of the life insurance coverage you need.
With a group life insurance plan, your employer purchases a single policy that covers all employees. This policy is subject to a single group premium payment. Some employers may pay the entire cost of the group policy (which is tax deductible to the employer). But if the plan requires you to pay a portion of the group premium, that amount will probably be lower than what you would pay for an individual insurance policy. And you generally don’t need to pass a medical exam when applying for group life insurance.
The major disadvantage of employer-sponsored life insurance is that it isn’t portable. If you leave your job, your group life insurance coverage will end, unless you’re allowed to convert your group coverage to an individual policy (which may cost significantly more). This could leave you underprotected if you’re unable to qualify for a new policy at a reasonable cost because of your age or changes in your health.
Another disadvantage to group life insurance is that the policy may not be tailored to your individual needs. For example, the amount of coverage may be less than what you require to be fully protected. If so, the group policy may give you the option of purchasing more coverage for an additional cost and for which you may be asked to answer medical questions. But even if you end up buying supplemental insurance through a separate company, your employer-sponsored plan gives you a head start in meeting your life insurance needs.
Question:
What do you think of Energizer’s plan to split into two companies?
Answer:
Energizer Holdings, Inc. (NYSE: ENR) operates in two segments, consumer products and batteries, roughly split 50/50. The split will offshoot the personal care brands like Schick, Edge, Playtex, Banana Boat and Hawaiian Tropic, while batteries and portable lighting products will be anchored by the Energizer brand.
The split is designed to enhance shareholder value, but until the companies split, it will be hard to gauge each company’s potential for growth. We recommend avoiding Energizer for now. The company has likely already realized the pop in price that generally follows a spinoff announcement. We suggest waiting until the spinoff is complete and analysts have been able to determine the value of the individual companies.
Question:
I’ve heard the rule to doubling your money is the rule of 72, but that makes no sense to me. Can you explain?
Answer:
You can determine the number of years it will take to double your money by dividing 72 by your anticipated rate of return. This should give you approximately the number of years it will take to achieve your goal. For example, let’s say you have $1,000 invested and you anticipate earning 6% on your money. Divide 72 by 6 and you get 12. Your money should grow to $2,000 in about 12 years through compounding interest. The interest you’ve earned in year two will be earning interest in years three through 12.
You can also use the rule of 72 to determine the rate of return you need to earn to double your money in a set amount of time. Let’s say you have $1,000 and eight years. Divide 72 by 8. The result is nine; therefore, you’ll need to earn 9% to double your money in eight years.
At Henssler Financial we believe you should Live Ready, and that includes consulting experts for financial matters you do not understand. If you have questions regarding your financial situation the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
