Smart Investing: Getting Rid of a Bad Annuity

Ulli Uncategorized Contact

Ok, I admit it—I am biased when it comes to annuities. My generally negative view is not based on my own experiences but those of clients and a good portion of my newsletter readers (even though their preferred investments are no load mutual funds and ETFs).

The stories I hear are very similar in that most people I have talked to complain about them in regards to performance, fees and ridiculous surrender charges.

My first question usually is: “Did you go out and buy this annuity or did someone sell it to you?” The moment of silence on the other end of the phone is a dead giveaway that the former didn’t happen but the latter did.

While annuities certainly have a place, most investors are not well informed, or are even being even misinformed, about the pros and cons of such a commitment. For example, one of my retired clients, who is traveling across the U.S. by motor home, called to tell me that at his last overnight rest stop, annuity salesmen were putting on a seminar for seniors and that many signed up. He did too, but changed his mind after discussing the presented information with me.

While this may be offending to those working in that industry, it’s worth noting that high up front commission can very easily compromise the integrity of a salesperson. My suggestion is that if you think an annuity is something for you, do your own research and buy one that has no surrender charges.

While some of my clients have an annuity with my custodian (Schwab), I have also heard good things about “Ameritas Direct.” I have no relationship with them, but you can find out more info at their site at:

http://www.ameritasdirect.com/

However, if you’re stuck with a bad annuity, what can you do? While this is not my specialty, here’s an article by Kiplinger on “How to Unload a Bad Annuity:”

http://www.kiplinger.com/retirementreport/features/archives/2007/01/Cover_Jan2007_03_01.html

If you’ve had a good (or bad) experience with an annuity of any kind, feel free to comment. You can even do so anonymously, if you want to maintain your privacy.

No Load Fund/ETF Tracker updated through 3/23/2007

Ulli Uncategorized Contact

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

A strong rally supported by the Federal Reserve’s action, and a neutral statement, had all major indexes showing signs of life.

Our Trend Tracking Index (TTI) for domestic funds moved higher and now sits +4.94% above its long-term trend line (red) as the chart below shows:



The international index rallied as well and currently sits +9.04% above its own trend line, as you can see below:



For more details, and my latest market commentary, please see the above link.


Will Target-Date Funds Meet Your Retirement Goals?

Ulli Uncategorized Contact

Lately, I have seen a variety of articles touting the benefits of using target-date funds (also known as Lifestyle or Life-Cycle funds) to reach your retirement goals.

One write-up in particular started out by intelligently stating that “low contribution rates could leave investors with a retirement shortfall.”

Duh!

If I don’t contribute to anything, I’ll be facing some kind of shortage in the future. It doesn’t take a mathematician to arrive at that conclusion. That would apply to any type of investment account, wouldn’t it?

The problem I have with Lifestyle funds is that the investing public is lulled into a false sense of security by believing that this type of fund, if regularly contributed to, will be a “safer” investment than a “regular” mutual fund.

This is absolutely not true. Lifestyle funds go down in value during bear markets just as much as other funds. I wrote the article “Do Lifestyle Funds Provide Greater Security” some 4 years ago, just before the U.S. bear market was running out of steam.

You can read it at: http://www.successful-investment.com/articles11.htm

Whether you decide to use Lifestyle Funds, or any other vehicle for that matter, using a prudent approach by staying out of the bear trap (via a sell stop discipline) will do more for your financial health and your future retirement than the investment itself.

No Load Fund/ETF Tracker updated through 3/16/2007

Ulli Uncategorized Contact

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

Subprime loan concerns pushed the markets down severely last Tuesday and, while the major averages received, they ended the week slightly down.

Our Trend Tracking Index (TTI) for domestic funds moved lower and now sits +2.93% above its long-term trend line (red) as the chart below shows:



The international index slipped as well and currently sits +6.02% above its own trend line, as you can see below:

For more details, and my market commentary, please see the above link.

The SubPrime Debacle

Ulli Uncategorized Contact

Two weeks ago, when the global markets tanked, the blame was squarely placed on what happened in the Chinese stock market. I am sure that we can find a scapegoat willing to take the heat for today’s 2% drop in the major averages.

As I looked around, I came to the not so unique conclusion that the fault is clearly found in our own business backyard. Especially, in that part of the mortgage industry that “prides” itself on subprime lending. To see an almost similar repeat of the Savings and Loan crisis some 20 years ago represents nothing but greed based on stupidity and ignorance of subprime lenders.

During the height of the real estate boom, a couple years back, some of my clients in the mortgage industry boasted that they could make a real estate loan to anybody who could write the words “stated income” and was able to fog up a mirror.

That’s it!

Credit scores or actual means of repayment were of no importance. Everything was based on the fact that real estate would go up forever and refinancing was an ever present option. It was la-la-land for mortgage brokers.

Sure, why not go for the upfront money with a marginal borrower. If you can make a couple extra points right now, why should you care whether payments can be made later? It’s money in your pocket. Besides, your company gave you those products to sell, so you’re doing the right thing.

I don’t blame the individual sales person for bringing home the bacon; I fail to understand how an entire industry can jump on this apparently unregulated band wagon without ever considering the potential fallout from such reckless lending activity.

While the jury is still out as to the total spillover effects, not only on real estate but the economy as a whole, the end result will most likely be very costly to the tax payer—again. Just like after the S&L; crisis of the 80s, a lot of jaw boning will take place, some participants will get their hands slapped while others will go to jail for direct fraud.

Lending regulations will be tightened but, after a few years, when all is forgotten, it will be business as usual.

Sad but true.

No Load Fund/ETF Tracker updated through 3/9/2007

Ulli Uncategorized 2 Comments

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

The markets stabilized after last week’s sharp sell off and the major indexes gained slightly.

Our Trend Tracking Index (TTI) for domestic funds inched higher as well and now sits +3.71% above its long-term trend line (red) as the chart below shows:



The international index also recovered and currently sits +6.84% above its own trend line, as you can see below:

For more details, and my market commentary, please see the above link.