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How to Stay North When the Market Goes South

You’ve heard the expression your whole life, but what does it mean when it applies to your finances? Well to begin with, it’s not good.

Here’s the definition from Dictionary.com​:1

go south

verb phrase
to fall or slide down; to decline; to fall in value

Examples
His golf game is going south.

Usage Note
slang; goes south, going south, went south, gone south

The recent stock market downward corrections in 2018 have millions of active and passive investors nervous… again.


Many experts agree that the nine-year bull market is feeling the giant paws of the bear market clawing into their financial breadbasket.

I concur and believe this is only the beginning.  Here are a few headlines to consider taken directly from Google on Saturday March 24, 2018.2

My personal favorite is the last one stating Losses are part of the game when investing in the stock market”. Maybe it’s just me, but I've always thought keeping my money is always better than losing it. 

Dow closes at 2018 low as trade worries rise - MarketWatch
https://www.marketwatch.com › Markets › U.S. & Canada › Market Snapshot

1 day ago - The benchmark index lost 6% over the week and is down 3.2% year to date. The Nasdaq Composite Index COMP, -2.43% declined 174.01 points, or 2.4%, to 6,992.67 and posted a 6.5% loss over the week. Weekly losses for all three benchmarks were the steepest since January 2016, when markets were ...

Dow drops more than 400 points into correction, posts worst week ...
https://www.cnbc.com/2018/.../us-stock-markets-set-for-a-sharp-fall-at-the-open-amid...

2 days ago - The major averages posted their biggest weekly loss since January 2016. The Dow and S&P 500 dropped 5.7 percent and 5.9 percent this week, respectively, while the Nasdaq pulled back 6.5 percent. "The market has been priced for perfection ... and that leaves the market vulnerable to surprises. In this ...

MARKET SNAPSHOT: Dow Closes At 2018 Low As Trade Worries Rise
news.morningstar.com/...markets/2018032310549/market-snapshot-dow-closes-at-20...

2 days ago - The major averages posted their biggest weekly loss since January 2016. The Dow and S&P 500 dropped 5.7 percent and 5.9 percent this week, respectively, while the Nasdaq pulled back 6.5 percent. "The market has been priced for perfection ... and that leaves the market vulnerable to surprises. In this ...

Dow Jones and S.&P. Slide Again, Dropping by More Than 4% - The ...

https://www.nytimes.com/2018/02/05/business/stocks-equities-dow-markets.html

Feb 5, 2018 - The rule book is now changing, a shift that is sending tremors through the financial markets. The Standard & Poor's 500-stock index fell by more than 4 percent on Monday, deepening its losses from the previous week and erasing its gains for the year. The Dow Jones industrial average sank by 4.6 percent.

Stocks close down, making February the worst month in two years for ...

www.latimes.com/business/la-fi-financial-markets-20180228-story.html

Feb 28, 2018 - Some of Wednesday's drop was due to a slide in the price of oil, which sent energy stocks to the market's sharpest losses. The S&P 500 ... He told Congress that he's more optimistic about the economy, which led some investors to anticipate four rate increases for 2018, up from three last year. Among the ...

This Year's Stock Market Losses Are Normal

awealthofcommonsense.com/2018/03/this-years-stock-market-losses-are-normal/

This Year's Stock Market Losses Are Normal. Posted March 20, 2018 by Ben Carlson. The recent market correction was unusual in how swift it occurred but the magnitude of the losses shouldn't be unexpected for investors. Losses are part of the game when investing in the stock market. This piece I wrote for Bloomberg in ...

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Here’s a picture I took on my iPhone, March 24, 2018. This graph clearly illustrates the current market conditions of the last 3 months.

So how does one stay north when the market goes south?

One solution I can share.
The clients that I have helped with this dilemma have not been concerned from this down turn because they made decisions and acted to protect themselves from market losses. How? Because they re-allocated only what was needed to cover the income gap for projected essential expenses (after focused discussions and strategy sessions) into…

You guessed it, the annuity. That awful, beat up, misunderstood and bullied financial instrument that falls into the monetary hierarchy between savings accounts / Cd’s and the stock market.

Let me first say, annuities are not for everyone and I do not consider annuities to be an investment in a portfolio. After all it is an insurance product and should not be considered anything else. However, when they are positioned to provide stability, protection against loss of principle and reduction of risk in a financial plan, they are unmatched by any other financial instrument.  

Robert Ibbotson, a renowned financial expert agrees. Ibbotson is a 10-time recipient of Graham & Dodd Awards for financial research excellence and a professor emeritus at the Yale School of Management. Today, Ibbotson's latest research validates that uncapped FIAs (Fixed Indexed Annuities) help control equity market risk, mitigate longevity risk, and have the strong potential to outperform bonds in the very near future.

Suze Orman, an internationally acclaimed personal finance expert has been recommending indexed annuities to shield your retirement nest egg from market volatility for some time. In her NY Times best selling book, “The Road to Wealth,” Suze Orman tells readers that “if you don’t want to take risk but still want to play the stock market, a good index annuity might be right for you.”

True, the circumstances of an individual’s life, goals and retirement needs to be identified, discussed and put in order first before even considering an annuity. Before making a judgement call on whether an annuity should be included in your planning process, I always recommend a little education first. To learn more about annuity basics, read this article on my website: What is an Annuity?

This article is not intended to give you all the details, stats, pros and cons of annuities. Its purpose is simply to illustrate a way to help you keep the money you’ve earned and serve as an alternative to gambling away any portion of your nest egg benchmarked for your essential spending.  Depending on your needs, availability of assets and financial goals, annuities if utilized and set up correctly, can provide a guaranteed solution for predictable income that you can’t outlive.

Most people like receiving social security checks and funds received from pensions but rarely think about or acknowledge the fact that they are annuities.

A final note: As with any bull run, your investments are at an all-time high in gross value (minus the recent decline of market value) which translates into higher purchasing power. If in December 2017 you re-allocated of a portion of your IRA, 401k, 403b and or brokerage account into a tax-deferred annuity, it would have would have bought you more then it will today. 

How much longer will you wait to consider these benefits? When you lose another 4%, 6%, 10%? Something to ponder.

Now you know there is a way… to stay north when the market heads south.

As always, retire wisely my friends...

Finding a reputable and trusted partner to assist you with your financial & insurance needs is of vital importance.  I will work hard to find the best programs, coverage and rates that fits your budget and your needs. Contact me at 949-216-8459 or ccolley@coliday.com


Other articles about Annuities:
What Are Annuities?
Alternatives to Low Paying Bank CD’s

Information and materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. The above information is not intended to provide, and should not be relied on for, tax, legal, accounting or investment advice.
Coliday / Craig Colley is not giving any financial advice, is not a financial advisor and is not affiliated, employed or endorsed by the SSA, Medicare.gov. or any other government agency.

1)  http://www.dictionary.com/browse/go-south 2)https://www.google.com/searchq=how+to+stay+north+when+the+market+goes+south&oq=how+to+stay+north+when+the+market+goes+south&aqs=chrome..69i57.47458j0j7&sourceid=chrome&ie=UTF-8 3)graph https://www.nytimes.com/2018/02/05/business/stocks-equities-dow-markets.html

Alternatives to Low Paying Bank CD’s

Guaranteed-income-Graph-1-400pxIn a time when many financial experts are predicting another major correction in the stock market, there is a safe alternative to seriously consider; Fixed-Indexed Annuities. Now before you make a snap judgement (as many do when they see the word annuity) take a moment and find out just how much this program can provide in retirement. If you are like most retiree’s, you probably share the number one fear which is running out of money. So let’s look at what a fixed-indexed annuity is and how it can benefit you.  

What is a fixed-index annuity?

A relatively new financial option offered by insurance companies, the fixed-index annuity was created in 1994 as an alternative financial product to CD’s, mutual funds, and stocks. Participating in a fixed-index annuity offers tax deferred growth and a guarantee against loss of principal and options for gains when the market does well.

Safe Money

Many life insurance companies that only offered variable annuities are now offering fixed-index annuities as a very attractive and safer option to their clients. Unlike variable annuities that invest in different mutual funds, the performance of fixed-index annuities are tied and mirror the performance of a single index such as the S&P 500.

CD alternative

A safe investment, but with today’s all time low interest rates certificates of deposit are paying less than half the amount of a percent 10-year Treasury Bills which is less than 3 percent. With a fixed-index annuity, there is usually a guaranteed minimum rate of return. You can also earn a substantially higher return if the index does well.

Mutual fund alternative

Diversifying through mutual funds does not protect you when the market declines. Mutual funds may be less risky than individual stocks but you can still lose money in a bear market as 401K plans dropped by more than 30% in 2008.

Stock market alternative

Older individuals do not have time on their side in a volatile stock market to recover from losses and are hesitant to put their hard earned retirement savings into the market. The bear market that existed from the end of 2007 and into early 2009 may have also affected those who are younger to think about other options.

Preserve capital

The goal is to preserve capital and a fixed-index annuity is an alternative to a risky stock market or mutual funds for anyone who cannot afford to lose money. Upon the purchase of this type of annuity the contractual agreement will guarantee that you will not lose any of your principal (and potential interest credits) and will usually have a minimum interest rate earned for every year while you hold the investment.

Looking for extra money you want and need?

An excellent feature of a fixed-index annuity (if you are tied to the S&P 500) is if the stock market and/or index should fall you do not lose any money in that year. Similar to a CD in a retirement account, a fixed-index annuity will not only earn you a base interest rate but also allows you to participate in the positive index returns.

Typically, you only receive approximately 75% of an increase on an annual basis, starting from the purchase date of the annuity, but a substantial difference in earnings can still be made in that year. Based on the performance of the index, there may be a cap on the maximum amount of extra interest earned.

Guaranteed income for life

Another great option of some fixed-indexed annuities are the Guaranteed Income for Life riders. For those individuals looking for income for life (similar to how social security benefits work), many programs offer a separate income growth option that is different from the cash value of the annuity, which can have a guaranteed interest rate of 7 to 10% on your initial premium or principle payment for up to 10 years. You then draw a guaranteed amount from that income growth (based on your age and if you have an individual or joint account) based on the percentage determined in your policy.

Market performance is always unknown

A fixed-interest annuity makes sense for people who want to participate at a lower level of risk in the stock market without  investing directly in the market.  You will not earn as much as an index fund outside of an annuity in good markets but your money will be safe if the markets turn bad or bearish.

In conclusion fixed-indexed annuities might be the best fit for anyone who is looking for financial gains from the upside of the market and cannot afford to lose a dime if the market has another major down turn (which many experts predict will happen). Life time income benefits are also very attractive in providing peace of mind in retirement.

Finding a reputable and trusted partner to assist you with your financial & insurance needs is of vital importance.  I will work hard to find the best programs, coverage and rates that fits your budget and your needs. Contact me at 949-495-2016 or ccolley@coliday.com