The media is focused on Hurricane Florence and its path toward the Carolinas and Virginia. Being a category 4 hurricane with 130 mph sustained winds, over a million residents are subject to mandatory evacuation due to risk of life-threatening storm surge, dangerous winds, and flooding. Our government is warning residents to take protective measures. This week also marks the 10th anniversary of the Lehman Brothers collapse; yet in the financial industry, investors are often told to stay the course and ride out the storm. Can you suffer through another bear market like 2000 or 2008 when the S&P 500 fell over 50%?
For several years, I have written in-depth annuity reviews because there is little information about these complex products. Many retirees are being enticed by free dinner seminars and promises of huge returns with no risk. I give an A+ to insurance companies for producing a product that they claim to be "no fee" (are you kidding me? Fees are simply hidden so you can't see them), no downside risk (yes true) and still has the potential for stock market returns (too good to be true). Let's take a look at that last piece and the topic of this blog post: can index annuities provide stock market returns?
Yes I am swept up in the hype of the release of the movie "Crazy Rich Asians." As an Asian-American, I am hyped to finally see a major motion picture with an all Asian cast which we haven't seen since 1993's Joy Luck Club. Please go out and support the film! But today's blog post isn't about the film, but about S&P earnings season which I'm calling crazy rich earnings. We have been bullish on the market because of the extremely strong earnings coming out of corporate America. While others have been warning about valuations (for years), remember that no bear market was caused by solely by over-valuation. How good has earnings season been? Let's take a look.
Sometimes it is fun to look back and see who made the correct call on the markets. High profile investors make bold calls but are seldom held accountable for the bad ones. Yet, the media will go back to the "big" names year after year because they generate clicks for their ad dollars. Unfortunately this doesn't bode well for your investment portfolio if you take their newsworthy headlines as actual investment advice. Let's take a look back two years to the summer of 2016 when two of the most prominent investors Bill Gross and Jeffrey Gundlach were screaming SELL!
The Allianz 222 annuity has been one of the best selling index annuities for several years now as I wrote my first review of the product in May 2014. For two months through September 17th, they have increased the premium bonus from 22% to 30% (25% in NJ and OR) which gives the protected income value a nice espresso shot from day 1. Because this being sold by agents extra hard, I have received several calls from people looking for advice. Given that many seem confused as to how the bonus works, and no it doesn't give a boost to your account value, I though it would be a good idea to have a stand along blog post for this topic. So let's take a look at how it works, I will walk you through some of the numbers so you know what you are buying before signing on that dotted line.
The annuity business has grown in popularity as investors, especially those nearing retirement, look for options to protect themselves from stock market volatility and give them a decent income stream in retirement. With over $200 billion in annual sales, the annuity industry is big business with lots of salesmen trying to persuade you to make a purchase.
Today I will dig deep into the Allianz 222 Annuity which was launched in January of 2013 and was one of the best selling indexed annuities in the industry for the 4th quarter of 2013. Sales of indexed annuities, a fixed annuity that provides a minimum guaranteed rate of interest combined with an interest rate tied to movement of an index, increased to $39.3 billion in 2013, a 17% gain year over year. This is the biggest percentage increase of any form of annuity.
The Fed has been raising interest rates off its emergency levels for the past year and that should be good news for savers who can finally earn a risk free return. However, if you aren't savvy, then your large bank may still be "stealing" your interest by not paying you market rates. Do you know what your financial institution is paying on your savings account? If the answer is no, then you should check their website or your latest bank statement. Here is the ugly truth, Chase and Wells Fargo still are paying just 0.01% on savings accounts. That is robbery as they are pocketing your interest and dropping it into their profits which are in the billions. With money movement a simple mouse click away, you shouldn't allow the big banks to steal your interest.
Today President Donald Trump has indicated that he is willing to slap tariffs on every Chinese good imported to the U.S. should the need arise. This is a shocking comment but likely only rhetoric. The stock market shrugged it off and the S&P 500 is flat on the day.
In a couple of months, drastic sector changes are coming to the S&P and MSCI indices which have potential implications to your investment portfolio. Some of the biggest names in tech, Netflix, Facebook, Google and others are changing sector classifications and if you aren't aware then it could have a major impact on your investment portfolio. Morgan Stanley has called the upcoming realignment "unprecedented" noting that there has only been one similar kind of sector change in the history of industry indexes when the real-estate sector was spun out of the financial group. This is different in that it is shifting some of the largest companies to a new sector called communication services.
Roughly 7 months ago, I wrote the blog post titled "Bitcoin mania will end in tears." Given my experience during the internet stock bubble of 1999, it felt like bitcoin and crypto were in a similar period of boom soon to be followed by bust. Those who said "this time is different" were proven wrong, again.
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