The week's best financial advice

Three top pieces of financial advice — from life insurance's broken "taboo" to why gadget warranties are a rip-off

Warranties on gadgets may be a waste of your money.
(Image credit: iStock)

Here are three of the week's top pieces of financial advice, gathered from around the web:

Life insurance's broken "taboo"

Your life insurance rates may be about to go up, said Chris Matthews at Fortune. Though "it's taboo in the industry for insurers to raise rates on policies previously sold," tens of thousands of Americans who bought universal life insurance policies will likely face higher rates next year. Nearly a decade of historically low interest rates has made the policies more expensive for insurers to maintain. As a result, some insurance companies have decided they have no choice but to raise rates, and industry analysts "expect the trend to gain steam." The extra annual charges can range from $15 per year for a policy worth $250,000 to hundreds of thousands of dollars for policies worth upwards of $10 million.

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The 'barbell' investing strategy

"Should you invest in last year's beaten-down stocks, or should you stick with the winners and put even more money there?" asked Simon Constable at US News. The answer is simple: "Do both." An analysis of 25 years of data shows that investing in last year's 10 worst- and 10 best-performing subsectors of the S&P 500 "is historically a winning strategy." This "barbell approach" — which bets that winning sectors will consolidate their gains through a bandwagon effect, while battered stocks will recoup their losses — beats the index's overall performance 68 percent of the time. Only in 1997 and 2008, both years with a serious stock market crash, did the strategy fail to beat the overall market. Still, no investing approach is foolproof, so "it may make sense to limit your exposure to this strategy to a fixed percentage of your portfolio."

Why gadget warranties are a rip-off

Unless you're an incurable klutz, you probably don't need a warranty for that shiny new gizmo, said Geoffrey Fowler at The Wall Street Journal. Unlike your house or your health, the pain of repairing even pricey consumer electronics "is still relatively limited" and sometimes cheaper than the warranty itself. For instance, Apple will repair an iPhone 6 screen in its stores for $109, but AppleCare costs $99 up front, plus a $79 screen deductible. Then there's the likelihood something will actually go wrong. Only 15 percent of buyers got a new phone because the old one broke, and only 2 percent because it was lost or stolen, according to data from Consumer Reports. A better idea: Put the money you'd spend on a warranty into a rainy day fund you can spend on anything, gadgets included.

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