This blog is a warning that either you have or will be exposed to a large amount of dire warnings and sales material from annuity companies.  Letters, television and radio ads as well as what is on the internet are all coming to you courtesy of the most recent market downturn. 

They will promise you the stars and the moon just to get you to buy a product that may be highly expensive, tie your money up for long periods of time and possibly charge you exorbitant fees should you regret your decision.  They’ll play on your emotions by telling you that your principal is protected or maybe your investment will never go down in value when the markets decline.  They’ll guarantee you income for life and many other wonderful bells and whistles*.  I can go on and on but what is most important is that you understand there is much more to the story then they are telling you. Unfortunately you might only be able to find them in the fine print.  

Recent market volatility and declines are the ultimate dog whistle for those living in fear.   Don’t let them play on your emotions as market volatility and corrections do occur over time.  Instead of living with anxiety consider your investment profile and work on a game plan.  If you are a buy and hold investor, maybe the best thing to do is accumulate cash and “wait for the fat pitch” (buying opportunity) which may occur as a result of lower prices.

If you are a risk management type of investor, what you might want to consider is a temporary reduction in your allocation to equities with the goal of adding to new or existing positions as opportunities present themselves.   For example, instead of holding 100%, 80% or 60% stocks, you might want to reduce it to a level where you feel more comfortable.  Some think 58% is an appropriate level. Others might consider 40% or 33% or 20% is fitting.   It’s a personal choice that only you can make. 

A reduction in your positions may allow you to repurchase what you sold at a lower price.  It may permit you to reconfigure your portfolio by getting out of some of your “dead wood”.  In either case the alternatives may be a much better proposition than panicking and running to the arms of the annuity salesperson.  

So if you are worried about a market decline, step back and reflect on your portfolio.  Reassess your goals and objectives.  Determine if you have too much allocated to equities or if the percentage committed is acceptable due to your faith in the long-term.     You may even decide a review of your thoughts and ideas by a professional is warranted.   Such action may help you sell shares of positions that no longer meet your needs while achieving the goal of reducing your risk.

In the end, remember there are always solutions for your concerns.  Why not consider them first before falling into a trap of fear and running into the arms of an annuity salesperson?    Think about it……..


*Annuity guarantees are backed by the strength and claims-paying ability of the respective issuer.

Tom is the Founder of TRG and has been the President and Chief Investment Officer since 2008.