I was in the gym this morning and I started thinking how working out and
investing are really similar.
When you work out, you usually want to gain something; either better overall health, weight loss, or even muscle growth. Now if you read the fitness magazines, there are many companies that tout their product as the latest and greatest to achieve that perfect body with minimal or little effort on your part. The “take this pill, eat all you want and lose 30 pounds in a month”, or “use this machine for 10 minutes and you will have 6 pack abs in a week” advertisements all want you to believe that these products will get you the successful body you are looking for.
Well, I believe the only place that success comes before work is in the dictionary! The old adage “No pain, no gain”, is still true. If I want to lose weight or increase muscle, I am going to have to do a few of the basics like eating a healthy diet, increasing my heart rate for an extended period of time, and stressing my muscles. These are the foundations of a healthy person. I may use some additional products to ramp up my metabolism, or increase my protein to fuel the muscle growth, but to grow safely and to stay healthy, I will probably avoid the higher risk products.
The same is true in our investing. There are products and services that will promise you “double digit growth with no market loss”, “double your money in a year, can’t lose a penny ever”, and so on. I have found that most of the claims are unfounded or only real in a perfect, hypothetical world. Now don’t get me wrong, I think investments are neither good or bad and they need to be determined by your financial goals, time to retirement, risk tolerance and the amount you have to invest. I think smart investing means having a plan that increases your account with minimal risk and a fair return.
When I am investing, especially for my retirement, I want to do it safely and with a mostly proven track record. That is where a Fixed Index Annuity comes in. The insurance company guarantees you a minimum growth no less than 0% (floor), and a potential maximum growth (cap) that could be as high as 8% or greater. That growth is determined by the indexes you participate in and the length of time you agree to keep your money with them. If I stop working out next year, I will lose my gains (health, muscles, etc…), however, with an Annuity, I get to keep all of the gains I made last year due to an annual reset feature. I also realize that the greater the growth potential, the greater the risk of loss so I am willing to give up a little of the potential growth to protect from all of the potential loss. In other words, if the market is getting 10% now, and I am only getting 6%, that’s o.k. because when the market loses 12%, I won’t lose any.
This is good, solid, fundamental investing. Remember the story of the tortoise and the hare? Slow and steady always win.
If you would like to see how a Fixed Index Annuity might work for you, click on the yellow button to sign up for my newsletter and I will get back with you to discuss the potential, features, and options of a FIA.