How The Rich Play The Market- New WSJ Article

feature-box-goldA new article in the Wall Street Journal caught my eye.  “How The Rich Play The Market” is a fresh reminder that human nature is just that- human.

The ‘Rich’ don’t necessarily have any secrets, better will, stronger nerve, or more skills.  In fact, even the ‘Super Rich’ suffer from the same impulses and trading habits as everyone else.  They may simply have more resources and be able to recover faster.

These households, with an average net worth of roughly $90 million, invest intelligently, for the most part, spreading their bets widely, seldom trading and keeping their investing taxes to a minimum.

But the superrich also commit rookie mistakes. Their approach to diversification might not always be ideal. They chase investment fads like dogs chasing parked cars. They freeze with fear just when bravery is most likely to be rewarded. Maybe the “smart money” isn’t so different from the middle-class “dumb money” that Wall Street likes to mock.

The last paragraph of the article, which appears Here, really says it all.

You’re better off doing what Wall Street can’t: cultivating patience, trading as seldom as possible, focusing only on those rare companies where you might know something everyone else doesn’t and, finally, rebalancing when it is hardest.

Right now, that might mean trimming stocks a bit just as other people are most tempted to add to them.

So how best to lock in gains? Consider annuities.  A Fixed Index Annuity offers some attractive options, chief among them a guaranteed floor that protects you from losses.

Other options which move more to the Hybrid Annuity category, include

  • Return of premium
  • Partial liquidity ( i.e. 10% free withdrawals, nursing home and terminal illness waivers, income)
  • Lifetime Income annuitization options
  • Additional cost of living increases, LTC type enhancements and death benefit enhancements with NO UNDERWRITING… if need be.

Index Annuities are an excellent way to lock in gains, protect from losses, yet still participate in some of the market upside.  If you’ve had a good strong run, re-balancing out of riskier positions just makes sense.

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