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- Never invest with a “Buy & Hold” plan. It might have worked for Granddad but in today’s unstable markets,
high volatility and uncertainty; it almost certainly will miss the mark for you. You don’t have to ride
the Titanic to the bottom to figure out you are going in the wrong direction. Stop losses, and investing
with the market will do wonders to protect your principal and lower your risk. A 30% loss requires a 43%
gain just to get back even. It is much easier to prevent the loss in the first place as opposed to the
years, if ever, needed to achieve a 43% gain. If your broker or financial advisor employs this strategy
get out now with what you have left. It took over 30 years for the market to recover back to where it
was after the 1929 crash!! Don’t despair there are still fortunes to be made as the result of these market
conditions; it just takes a different tact!
- Never buy mutual funds. The average return from funds is considerably less than the gain
from the market as a whole. There are of course exceptions, but they are few and far between. These “professional
managers” must be paid and their huge salaries come from your gain! EFT’s [equity transfer funds] are an alternative,
but again you must be on the right side of the market. Information is essential, but at least you have saved yourself
from mutual fund loads, etc.
- Never buy Variable Annuities. These are simply mutual funds in an annuity wrapper.
You have the advantage of tax deferral, but still have ALL the disadvantages of the mutual fund. In addition, there is an
added array of costly, confusing, “insurance type” features that again lower your gain. Imagine how long it would take to
recoup your losses from these products!!
- CD’s, Money Markets, are to be used short term [6-12 months]. They are not designed
to be long term. Your principal is protected and safe-but has miniscule returns and are immediately taxable. CD’s and Money
Markets may, however, be attached by any creditor claim; i.e. lawsuits, long term care planning, etc. Inflation is another
story. With all our government deficit spending, unfortunately, inflation is probably right around the corner. Inflation
greatly decreases buying power. Inflation is the cruelest tax of all and is paid everyone, especially hard hit are those
who can least afford it.
- Hard Assets purchase is suggested in these times of uncertainty and potential high
inflation. By hard assets, we mean real estate, gold, diamonds, etc. Unfortunately, these items are not practical for most
people. Problems include them not being liquid, markets ever changing, etc. Additional expenses may be involved and returns
highly speculative. Highly specialized expertise is required. For those wanting immediate returns in a predictable time frame,
this is not the way to go.
- Bonds need to be utilized with caution. Bonds work like a playground see-saw. As
interest rates decreases the bond market value rises, conversely, as interest rates increase the bond market value declines.
The payout remains constant of course. Bonds may be a valued aid, but require expertise to get best value. An additional
word of caution, bonds are only as good as the backing entity. Ratings and bond values may change rapidly, greatly affecting
your investment.
- Annuities rate a good evaluation, always, but more so in these troubled financial times.
An exception is variable annuities that were discussed in point number 3. No longer are annuities just an accumulation investment,
but increasingly a large source of immediate, safe, market adjusting, guaranteed payout.
Benefits include:
- Safety guaranteed
- Tax advantages
- Some are market linked with potential for portfolio recovery due to prior market losses.
- Protected from loss [no risk to principal] with guaranteed minimum returns.
- Provides protection from creditor claims.
- Replenishment at death to provide for heirs after utilization for income, if necessary.
- Access to funds is as available as desired. Monthly, annually, etc. Complete account generally available immediately
for sickness, long term care or death.
- Many provide large bonuses to offset losses or simply increase your account value.
Not all shoes fit all feet! It is important to find out for yourself by calling us for a free confidential
consultation. We put money in your pocket. If we can help, you will certainly be advised, but the call is always yours. No
gimmicks, or pressure, just education about your options. You have a large potential for gain, and nothing to lose.
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Sincerely yours,
Julian L. Austin
President & CEO
First Fidelity Financial Group, LLC
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