Both the stock and bond markets have recently shown how risky they can be. Check out the following link from cnbc concerning the bond market (http://www.cnbc.com/id/100840444).For those of you who don’t have an active money management team to make immediate changes to your portfolios or the ability to move to a 100% cash position at a moment’s notice. Here are some alternatives you might want to think about.
Option #1: Deferred Fixed Annuities
Unlike cash and CD’s, Deferred Fixed Annuities are actually earning a decent return. They could be described as the perfect bond alternative. They guarantee your principal (subject to the claims paying ability of the underlying insurance company), they pay you a guaranteed minimum interest rate, and they often give you the opportunity to earn more than the minimum rate. Many companies also offer bonuses and very attractive income riders which could guarantee you an income for life. Although one potential downside is that you often need to commit to leaving most of your money in these accounts for a longer period of time. But then again, how long have you left your money in the stock or bond markets?
Option #2: Cash / CD’s
Yes, I know you don’t get a “decent return” for cash and CD’s these days, but something is better than losing money. Remember Will Rogers famous quote “I’m more concerned about the return of my investment than the return on my investment.” Cash and CD’s at least promise the return of your investment, something stocks and bonds don’t do.
Option #3: Single Premium Life Insurance
If you were holding your stock or bond positions outside of an IRA or other type of retirement plan, this could be one of the best options few people know about.
Single Premium Life Insurance can offer you everything you ever wanted from your bond positions; safety of principal, decent returns, and full liquidity.
On top of those benefits, single premium life insurance also offers tax benefits and potential long-term care benefits as well. So, what is the bad news? What is the downside? You have to be able to qualify medically for life insurance. This is a free process, but it does take some time, often 4 to 6 weeks. If you do qualify medically, and you have money outside your retirement plans, then this option could be your ace in the hole.
There you have it, three different alternatives for you to consider for your stock or bond money. Now it’s your turn to commit to a safer investment strategy.