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Missed Fortune – Eliminating Roadblocks To Get Your Money Back On Track

Posted on | January 22, 2012

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Eliminating Roadblocks to Financial Peace of Mind

The last time a 401(k) or IRA statement arrived in your mailbox, how did you feel when you opened it?

Were you giddy, optimistic and excited?

Or did you feel frustrated, anxious and disappointed?

If your response is best described by the latter emotions, you’re not alone.  For the past 4 years or so, record low rates of returns and the prospect of paying higher taxes have left many people feeling isolated and hopeless.  They feel as though they’re not gaining any ground.

Wouldn’t it be preferable to have a definite game plan that allowed you to avoid the roadblocks that are frustrating so many today?

The roadblock of volatility has stood in the way of those who’ve been taught to expect average rates of return of 12%.  They’ve been taught to “buy and hold” and that the market will always go up.

These are myths promoted by Wall Street that simply don’t reflect reality.

If a prospectus shows that your return will be up 50% the first year and down 50% the second year and then back up again 50% the third year and down 50% the fourth year, most people assume that they’d break even.

But the actual result looks much different.

If your $100,000 increased 50% up to $150,000 and then you lose 50%, you’re now down by $75,000.  Let’s say you gain another 50% that takes you back up to $112,500 and then you lose another 50% that now takes you down to $56,250.

Far from breaking even, you’re actually down 43.75% from where you started thanks to market volatility.

This shouldn’t be surprising considering that the average rate of return for investors in the S&P 500 over the past 20 years has only been 3.83% according to DALBAR.

You can do much better.  But you’ll have to do something different than what others have been doing.

Using an indexing strategy, you can protect your principal from loss when the economy declines and when the economy grows; your money grows as well.   Any year your money grows, your gain becomes newly protected principal.

People who used indexing during the past four years found themselves up by 45-50% at time when others were taking a very unpleasant rollercoaster ride.

The Volatility of the Lost Decade

From January 1, 2000 to December 31, 2009 we saw a lot of changes in the market.  $100,000 at the beginning of that time period was only worth around $79,000.

If you had used indexing during that same period, you could have locked in gains during 5 of those years that saw positive market growth.  The market declined the other 5 years, but with indexing, your gains during the up years would have become newly protected principal and you wouldn’t have lost any money during those down years.

The reason your money was protected during the down years is that it was indirectly linked to the market’s performance rather than being directly at risk in the market.

Under this strategy, that $100,000 you started out with in 2000 would have been worth over $200,000 at the end of 2010.

Whose shoes would you rather be in?

Another roadblock is found in the record low rates of return.

How can you expect to row upstream at a low rate of 1.6 miles per hour when the current is moving downstream at 8 or 9 miles per hour?  In this case the upstream rate represents your rate of return while the speed of the current represents inflation.

You have to have a strategy that automatically earns a rate of return 5-6% greater than the rate of inflation.  Indexing makes that possible by linking your returns to the things that inflate when we experience inflation.  This way inflation helps you rather than hurts you.

It’s shocking how many financial advisors don’t understand how to do this.

Missed Fortune strategies work.  They remove the major roadblocks that have been preventing people from taking ownership of their future.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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