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- 📈 Is life insurance worth it? | 7 company moats to look for
📈 Is life insurance worth it? | 7 company moats to look for
Here's what we've been learning over the past week
Equity Mates
March 24, 2024
This week on Equity Mates
Hey there Equity Mate,
2 weeks until our live event.
Only a handful of tickets remain.
Don’t miss out!
Here’s what we’re released this week:
Monday - Interest rate expectations, supermarket enquiries & ASX 200 rebalance - who's in, who's out?
Tuesday - Ask an Advisor: Glen Hare - The most common questions Aussies are asking advisors
Thursday - Is super-for-housing a good idea? & pimp my portfolio returns
Friday - Expert: Ben McVicar & Jowell Amores - Infrastructure: Invest in where the world is going
Tuesday - How our expert advisors are investing in 2024
Your questions, answered
Isabel asked via email:
Is life insurance worth it?
We put Isabel’s question to insurance specialist Phil Thompson, from Skye
To book a call with Phil and the team, click here.
Recent studies show that 70% of Australians recognise the importance of life insurance, yet only about half actually have a policy in place.
If you are working for an income, it means you need money to live. If this is the case, you need to protect this. If you think you do not need to protect your biggest asset, which is your income - why would you bother insuring your car? It’s not worth nearly as much!
So, here's something to think about. Imagine you've got a fancy $5 million Ferrari. You wouldn't skimp on getting insurance for the full amount, would you? So, why on earth wouldn't you insure your income, which could be even MORE valuable? Let's say you're a 30-year-old earning $100,000 a year. If you were unable to ever work again, you’d be losing out on approximately $5.87 million dollars in potential earnings over your working life.
We all know that feeling of being young and invincible. Nothing can touch us because we're invulnerable—and why would we need insurance? We'll never get sick or injured because we’re so busy living our best lives and being young and fabulous. And we're certainly never going to die. Right? Not to mention with an entry-level job paying barely enough money to cover expenses, there's no reason to purchase unnecessary life cover right now.
Wrong.
The truth is, no one is invincible. So while we may not like to think about it, bad things can happen to anyone at any time. And I get why you don't have the headspace right now for your own mortality. But the thing is, life insurance is not just money for when you die.
Money is the last thing you want to worry about when you or someone you love is facing death, or a serious illness or injury. But life insurance is about more than what’s left behind, it's protecting the lifestyle you have now.
If you have a question you’d like answered, hit us up at [email protected] or if you’d like to chat with Phil and the team, click here
This email is thanks to Magellan
Magellan focuses on investing in the world's best companies to grow and protect the wealth of their investors. They search the world for high-quality companies that they believe have a sustainable competitive advantage and will compound returns over the long-term.
Visit: magellangroup.com.au to explore their global equity and infrastructure strategies managed by their team of highly qualified and experienced investment professionals.
What we’ve been reading
Diving Deep Into Helmer’s 7 Powers Using Company Examples
As investors in individual stocks, one thing we’re constantly looking for is a moat. That is, a sustainable and durable competitive advantage that will allow a company to earn outsized returns and keep their competitors at bay.
One of the best books on sustainable competitive advantage is Hamilton Helmer’s 7 Powers. This article by Quartr summarises Helmer’s 7 powers and uses a number of companies as examples to illustrate the point.
Stepping through well-known companies like Costco, Meta and Ferrari, this is a great study in sustainable competitive advantages.
Thoughts on Ben Graham's "Unpopular Large Caps": A Still-Effective Strategy
Benjamin Graham was Warren Buffett’s teacher and mentor and is still today remembered as the ‘father of value investing’. Two of his books - Security Analysis and The Intelligent Investor - remain some of the most recommended investing books today. (Although, fair warning, in our opinion they are certainly not the easiest investing books to read).
This article takes a look at one investing style Graham popularised, which he labelled ‘Unpopular Large Caps’.
Put simply, this is where Graham looked for strong, well-known companies that were going through a temporary rough patch and had fallen out of favour.
“If we assume that it is the habit of the market to overvalue stocks which have been showing excellent growth, it is logical to expect that it will undervalue — relatively, at least — companies that are out of favor because of unsatisfactory developments of a temporary nature. This may be set down as a fundamental law of the stock market, and it suggests an investment approach that should prove both conservative and promising.”
This article looks back over more recent investing history and outlines why this strategy still holds. It also outlines the idea of ‘time arbitrage’ where the long-term fortunes of a company are mispriced due to short-term disruptions. Many investors have to be focused on the short-term (for example, professional investors have career risk and must report their results quarterly) so a patient investor can take advantage of this long-term mispricing.
Combine the two articles we’ve shared in this email - finding sustainable moats and finding mispriced companies - and you’re building the toolkit to be a great long-term investor.
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