Never confuse insurance with investments. Insurance is to protect against risks you can not afford to pay out of pocket for. Investments are for the opportunity of growth in your assets. Therefore, insurance should not be compared with investments. You should ask the FA how he/she is being compensated, if they are licensed to sell insurance. But before that, ask the FA why these particular products are "suitable" as "investments" when they are clearly insurance products. Take a picture as you wait for a response.Hi guys,
Recently I talked to a FA at my bank. He suggested 2 investments. They are the following:
Index Annuity:
- 100% protection of principal
- 10% withdrawal from principal
- 3% guaranteed return even if the market dips below 3%
- Rate cap: If annuity is fixed at 5%, you get 5% even if the market returns above that.
Structured Cap Annuity:
- Performance cap rate for example of 75% with 20% buffer. If the market had an 80% return in 5 years, I keep 75% of that return. With the buffer, if the market dips 17%, I get 17% return as protection. If the market dips below the buffer say, 23%, I still am protected up to 20% but lose 3%.
For the Structured Cap Annuity, heres a pdf for examples of performance: https://jmp.sh/teRUFJ2j
Let me know if these investments are good for me compared to other investments.
Looking forward!
You want a homemade index annuity? Put 95% percent of your money in 1 (25%),2 (30%) and 3 (30%) year treasury bills and notes, then go out and buy a long dated call option on the S&P 500 with the remaining 5% of your money. If the market closes below the strike price, you will still get a 3.2% return based on current market rates today guaranteed, no loss of principal at maturity, 25% withdrawal at end of year 1, 30% in year two, 30% in year three plus interest and any gain from the option. You can keep rolling this structure out as long as you like. It has a AAA rating, you can liquidate at any time but there may be a loss or gain prior to maturity, no rate cap if markets take off.
Structured Cap Annuity: All the insurance company is doing here, is keeping X% of your money in bonds (they keep the interest), and buying a series of puts and call options to capture the upside of the market while protecting against the downside with the puts. They aren't doing anything special other than collecting assets for which they earn and keep the interest while fooling the purchaser they are actually being "protected". For this, you will pay a high expense ratio annually.
Statistics: Posted by Grt2bOutdoors — Sun Sep 08, 2024 9:56 pm — Replies 24 — Views 1394