A Strategy for Any Market
“What if every year the market (S&P 500) went down, you could demand your money back, and then buy more at the lower price? Would you want to buy that index mutual fund?” Who wouldn’t, right??
Well, that’s the beauty of Protected Growth planning using fixed index linked annuities, or FIA’s. Last year’s ending point is this year’s starting point. An index linked annuity credits interest based on the upward movement of an index (such as the S&P 500) while protecting principal and previous earnings from market downturns. So, in a year when the market moves down, you retain your principal and previous earnings (or as I said earlier “demand your money back”), and now you are linked to this year’s new lower index value (it’s as if you bought more at the lower price) and you are positioned to earn interest on any upward movement from this new lower index value. And all this happens on auto-pilot, every year! That’s why it’s a strategy that works in any market. Now, having said that, I also must disclose to you that this strategy is subject to certain caps and limitations. So, how well does it work? Exceptionally well, according to a study conducted by the Wharton School of Business. Here’s the (June 2009) quote from Forbes magazine:
“Since 1995, these [equity-indexed] annuities have easily outpaced the S&P 500 and bond indexes alike. ‘There is no asset category that outperformed them. We were extremely surprised, really just amazed,’ says David Babbel, professor emeritus of insurance and risk management, who conducted a study of equity-index annuity returns beginning in 1995…(and ending Jan 1, 2009)
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