How Do We Make Money When The Market Is Bad?
How do we make money when the market is down?
I was talking to someone about index annuity and he said, “Well everything is down so I’m not investing right now.”
He just resigned himself to losses this year and perhaps next year. Who knows how long this will last? I certainly don’t have an answer. I’ll leave that up to politicians and economists. But what I can do is help you build a stable ecosystem for your financial house.
I had to explain to him and remind him that first, he is not losing money, and second there is still a way for him to make money on his index annuity and IUL (index universal life) this year even if the market is bad.
A Mindshift That’s Hard to Make
If you have been an investor for a long time and you’re new to the IUL, or perhaps you have an IUL and are still heavily invested in the stock market, there is a mind shift that you need to make.
In an IUL or index annuity, you don’t lose money. It can be hard to make that shift when you are so used to accepting losses when the market is down. You may put off big expenses, and further investments. But if you have an IUL, you can be reassured that your money is safe, and therefore you don’t have to necessarily put off those things unless you want to. There is a big difference there. And I say that’s awesome! You have full control of what happens to your money, instead of being controlled by what happens to your money. Life changer.
That is why I teach the Financial Foundation Pyramid where you put most of your money in financial vehicles that will not lose money at the bottom of the pyramid for defensive and offensive planning so you have a solid and stable foundation. Only money you are willing to lose should be in the higher parts of the pyramid, the aggressive and progressive planning levels.
The Financial Foundation Pyramid
You can see retirement savings, college savings are in the blue level (offensive planning). These should be relatively safe, and not be at risk. Yet, if we analyze the vehicles where we are saving for retirement and college, vehicles like 401k and SEP IRAs, 529s, stocks, and bonds, are at risk.
Even if we trust our employer to look after us and they are the ones offering these plans, 401ks, Roths, and IRAs are not safe! Know the facts behind 401k and how much you are really losing from your retirement-get my report on How Much is Your 401k Costing You.
If you are a business owner and have your retirement savings in a tax-deferred account like a SEP IRA, Simple IRA, mutual funds, index funds, or ETFs that can lose money in the stock market, this applies to you too.
You can still make money even in a downturn.
How?
By shifting your allocation to the fixed rate. During a down year, you can take advantage of the fixed rate, and at the time of this writing, ours offers 4.75%. Not bad when the index is down and the most you will make from it is 0%. Bank CDs offer up to 4.25% for 1 yr. But in an IUL you have the index potential when the market bounces back, whereas in a Bank CD, you don’t.
With the market being very unpredictable right now, you can lose 2 years of gains if this recession lasts 2 years. It can be longer, who knows?
Can you afford a lost decade?
Have you heard of the lost decade? This was from 1999 to 2009 when the stock market crashed twice (1999 and 2008) and throughout the entire 10 years, investments essentially didn’t make money.
Can you afford a lost decade? Even if you can, imagine how much more you would have if you didn’t have a lost decade. Your $1 million could have been $2 million. That’s how big of a difference it can be.
Do you have to be like everybody else? Do you have to follow the crowd?
I’m here to tell you, you don’t.
You can have your own secure, smooth-sailing economy regardless of the turbulent stock market.
All you need are the facts and your own sound judgment will point you in the right direction.
In my humble opinion, this time of market volatility is the perfect time to own an IUL (or index annuity if you have nonperforming assets in a 401k or IRA).
If I can help more people make sound decisions about their money based on facts so they have full control and can live freely with dignity, I have done my job.
Schedule an appointment if you have questions or are unsure of where your savings and investments stand in relation to the Financial Foundation Pyramid so you can start building a solid financial foundation and look forward to a secure future with dignity.
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Sheilla Vidal is a Retirement Income Certified Professional RICP® and life insurance broker. Sheilla is also a physical therapist, wife, mother of two, and one of the caregivers for her 85-year-old father. She is an avid learner. She writes, speaks, and recognizes that her work in helping clients live with dignity is her God-given mission.
