Two Ways to Reduce Bull Market Risk

MEDFORD, Ore., Nov. 16, 2017 -- Many people have made so much money in the bull market they now find their asset allocation is out of kilter, says an article in Physician’s Money Digest.

“People who planned to put, say, 55 percent of their money in stocks may find they’re now 75 percent in equities,” writes Ken Nuss, CEO of AnnuityAdvantage, an online annuity marketplace.

Financial experts agree it’s important to rebalance periodically. It’s especially crucial for retirees and near-retirees, he writes.

Money market funds are safe and liquid but pay little interest. Certificates of deposit are FDIC-insured but somewhat illiquid and pay modest yields. Bond funds are liquid and convenient, but short-term funds also pay modest yields. Longer-term funds pay more but their share prices are vulnerable to interest-rate hikes, he writes.

“Fixed annuities, often overlooked, offer a proven way to lower your risk,” he writes. “As well as guaranteeing your principal, they can cut your taxes and boost your yield.”

Fixed-rate annuities similar to bank CDs but pay more

Like a CD, fixed-rate annuities pay a guaranteed rate for a set number of years. When held in a taxable account, it offers tax deferral—and usually a markedly higher interest rate than a CD with a similar term.

Investors can now earn up to 3.49 percent for a seven-year annuity, up to 3.30 percent for a five-year contract, and up to 2.15 percent for a three-year annuity, according to AnnuityAdvantage’s database covering 35 insurers.

Fixed indexed annuities: guaranteed principal plus upside potential

While many people are worried about downside risk, they equally don’t want to miss out on the upside. A fixed indexed annuity can meet both concerns, Nuss writes.

The rate of interest it pays annually is based on the changes to a market index, such as the Dow Jones Industrial Average or S&P 500. Interest is credited when the index value increases.

The big advantage is that when the market falls, you lose nothing, he writes. In exchange for guaranteed principal, you’ll typically get only part of the market’s gains as an interest credit.

The minimum interest rate is usually zero, so there may be years when you earn no interest with a fixed indexed annuity. But there may be years in which you earn much more than you would with a fixed-rate annuity.

Nuss’s article can be read at http://tinyurl.com/y9c59fc9.

Annuity expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities. More information is available from the Medford, Oregon, based company at https://www.annuityadvantage.com.

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Contact:  Henry Stimpson, Stimpson Communications, 508-647-0705, [email protected]