Are you ready for the next market crash? Your money might not be as secure as you think.
Are you ready for the next market crash? Or is your money still in the market? If your money is still in the market, do you know how much money you lost when the market took that last dip recently?
When those who advise you to stay in the market tell you it’s only a paper loss, remind them that when the market goes back up you’re starting from a lower number. The significance of that fact cannot be overstated. If the market dropped by 25%, how much would the market have to go back up to get to the same point before the drop? If you guessed the market would have to go up by 25%, then you are incorrect. If market dropped by 25%, it would have to go up by over 133% to get back to where it was before the drop. This is one of the reasons why it takes so long to recover from a market crash.
Right now the market is fragile, and there is a lot of uncertainty and unrest in the world. There's an old expression… The market hates uncertainty and always flees to safety. The smart money is getting out of stocks and mutual funds, and moving to safer havens.
Simply moving your money to cash may not be the best thing for you, because then you are putting your money at risk to inflation. For those who have money that you wish to hold onto long-term for say your retirement, indexed annuities should be at the top of your list of consideration.
With indexed annuities you’ll get a reasonable rate of return without the risk of market loss. I think it’s worth mentioning that my wife and I own two equity indexed annuities.
Absolutely make sure you come back here next week for another edition of The Alemian File.