 Whether you call it a slow-down, recession, depression, or downturn, just about everyone agrees that the U.S economy – and the global one as well, in some respects – is not in a good shape, at present.
Here is what we find fascinating: investors are made to erroneously believe that, given the current economic tsunami, the evaporation of their investment values is understandable – and, worse – unavoidable.
Everybody’s pointing to the “BAD” Economy
While we agree that these are challenging economic times, we still question the wholesale finger-pointing. Immediately after the recession began, almost every business that failed – or is failing – cited, or more appropriately blamed, the economy for their plight. We are of the opinion that those businesses’ models failed long before the economy turned. The economic decline simply facilitated what was already waiting to occur.
 Every serious business has or is supposed to have “managers” that manage its affairs. One would expect a competent manager to steer a business not only during good economic times, but also during challenging times, as they are inevitably bound to happen. Isn’t one reason for going to business school to learn to grapple with the reality that things are not always going to be rosy? Isn’t that why we call the folks at the helm executives and pay them very well?
Your Financial Decision
As pointed out by famed investor, Warren Buffet, “Only when the tide goes out do you discover who’s been swimming naked.” In effect, the economic meltdown will do just that, exposing those businesses – and investors – with unrealistic and unsustainable strategies.
As an investor, would you place your wealth in a business if they told you that they would survive and do well as long as the economy did well, but would wither up your investment and fold, should the economy fall into a recession? Savvy investors would have nothing to do with any such organization!
In the same manner, we believe that if your investment portfolio is at the mercy of the economy, you do not have a realistic plan. On March 23, 2009, USA Today ran an article citing numerous individuals whose portfolios had been devastated by as much as 70 percent! In the case of a 59-year-old computer analyst who had planned on retiring in two years but now does not see that happening because his portfolio dwindled “to $500,000 from $1.2 million,” that’s a 58.33 percent decline! In order for this 59-year-old to get back to his break-even point of $1.2 million, his portfolio will have to gain 140 percent! How likely and soon is that going to happen? Of course, no one knows.
A Realistic Plan
The reality is that the economy and the stock market will do well sometimes and perform poorly other times. As a result, we advise and help our clients implement a strategy for their serious cash that guarantees their portfolios will not lose value as a result of stock market declines. However, when times are good economically and the markets are performing well, our clients’ portfolios earn interest based on a stock market index – up to a predetermined cap.
Let’s look at an example. Assume a contract with a minimum guaranteed interest of 2.5 percent, a cap rate of 14 percent, and a 100 percent participation rate in the S&500 Index. If the index were to lose or increase by less than 2.5 percent, the account would be credited the contractual minimum rate of 2.5 percent. On the other hand, all increases beyond 2.5 percent would be credited to the account, up to the cap of 14 percent. Imagine where our poor computer analyst and the millions of other devastated investors would be today if they had followed our counsel.
If this concept is music to your ears, we’d have to guess that you’ve probably been following the advice of a conventional financial professional, or you do not follow any professional advice – which is equally bad. Call 301.949.4449 or visit www.LaserFG.com today for your free, no-obligation consultation and join those who have discovered the secured sheltered route to a happy retirement.
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