Humana Inc.

This is not a political site. I try very hard to avoid political issues, especially those that are controversial. The last thing I want people to do is to get bad advice on investing because of political preferences. One of my readers asked my advice on health insurance companies though. The theory was that since so many people thought that health insurance companies were making a ton of profit (one of the reasons for Obamacare), they should be great investments.

My first comment is that you should never buy the stock of a company due to an entire industry. You should evaluate the company by itself and not based on the industry. If you don’t know how to do this, I suggest that you buy my book, The Confident Investor.   You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.

My second comment is that you should avoid sector investments. You can buy mutual funds or ETFs that follow a single sector. Avoid putting these into your portfolio. Find the best companies to invest in and then invest in them with a plan. Once again, if you don’t know how to do this, check out my book.

To answer the reader question, I started researching United HealthGroup [stckqut]UNH[/stckqut]. I went to Morningstar for my initial research and used that tool to generate the data for United HealthGroup and its top competitors. Morningstar gave me a list of companies and then I did a bit of quick analysis.

As we can see, the health insurance companies don’t generate that great of a return. These companies average out to 3.35% profit. The S&P500 averaged 16.14%! That means that health insurance companies aren’t just rolling in cash like Michael Moore implies. Taking the profit motive out of healthcare doesn’t seem to be the driving focus of Obamacare.

This article points out the fallacy of following the news to find your investments. While it is worthwhile to research companies that you hear about on the news or read about in the newspaper, just because they sound good there doesn’t make them great investments. The only sound way to make a great investment is to research the company using solid tools.