Every year about this time a man gets a reminder of the best single investment ever made in his life. And literally it was "in his life."
It was a life insurance policy. And not bought by him but by his parents. That was more than 70 years ago.
Otherwise he hasn't been a genius. In the 2008 crash his mutual funds are 40 percent down, give or take. Hopefully he says they'll come back.
But his single best investment never has to "come back." It has done well year after year, through booms and recessions, bubbles and busts.
Once a year it sends him a dividend check. Not a large one, mind you. It might cover one day's average living expense. But it is very large compared to the initial investment, thanks to the magic of compound interest. And to the wisdom of keeping up the payments.
The check is for $54.02.
To explain how so modest an amount can give such a kick, it is necessary to go back in time. Back to the 1930s when an agent of a large New York insurance company came to a home in Pittsburgh.
The boy's parents bought life insurance for him. A hedge against funeral expenses⢠Well, that was one way of looking at it. Children's illnesses were more often killers in those days. But it also was an investment in an average boy's life expectancy in America. And since it was an "ordinary life" policy, it had savings features. It built up cash values over the years. Plus add-ons to the final payout for beneficiaries.
The annual premium for $1,000 worth of insurance - bigger dollars back then, keep in mind - was $15.22. It still is. It insures a death benefit that has never quit growing. It now approaches $5,000.
When the boy grew up and married and bought more insurance of his own, his parents turned the quaint little policy over to him, advising: "Keep up the payments." He did. Millions of others have done just that over the years and been glad of it.
More unexpectedly, however, the insurance company a decade or so ago switched from mutual ownership to stock ownership. This was the huge Metropolitan Life, with its reassuring old motto: "The light that never fails." MetLife offered shares in proportion to policyholders' cash values. The boy of the 1930s opted to receive 73 shares.
And that's what produced the 2008 dividend of $54.02.
Yes, the shares have been battered of late. Subprime mortgages, the economic downturn and the housing slump have done much damage in the insurance industry. Look at AIG. Nor can any dividend be an absolute future promise. But getting $54.02 back on $15.22 paid out, don't we all deserve a kick like that⢠Especially in a down year.
