STAND UP AND PROTECT YOUR MONEY
Mark Zlotnik wrote an article about strategies to guarantee your income for life. The article was recently published in the Business in Vancouver newspaper. Here is the text from that article:
A person stands tallest when they have financial stability. Having money set aside, a plan for the future and income to make dreams come true, are goals I’ve taught my kids to strive for. Achieving them prevents a slouch from creeping into our stance.
Right now however, securing this confidence is a tough task. The world wide financial crisis has left many of us crouching, hoping to avoid getting caught in the crossfire. But hiding behind a tree, or lying low, can’t go on forever. Sooner or later, if one wants to achieve that sought after stability, we have to stand up, pick a path and take it.
Optimists, and more of us should be in that camp, are telling us about the great opportunities we now have to buy low. But you’re afraid, and understandably so. The cautious voice in your head warns that investing more into the market may be the wrong move, and things are likely to get worse before they get better. You would be crazy to even consider moving your investments around or buying new ones after the losses you’ve incurred, right? In actual fact, this is not the case.
Despite the fact your investments may have taken a big hit and are sitting 30-40% lower than they were 9 months ago, now IS a good time to invest, providing that investment is the right kind. And these days the right kind is one that guarantees you won’t take any further losses.
Guaranteed Minimum Withdrawal Balance is the name for this investment. GMWB protects your money so that you can’t lose any of what you invest. Better still, when the markets climb back to their previous levels and continue to grow, your money will grow along with them.
Let’s put it in perspective. If you were to invest in bonds or a GIC you’d make that 3-4% interest on your money. But it’s locked in and by the time you’re done with inflation your money has just kept pace. Not to mention you’ll still have to let the fine people in Ottawa take their share of it. On the plus side, your money is fully protected and won’t be subject to possible losses.
If you were to take that same money and put it into stocks right now several things could happen. If the market continues to go down, you incur a loss. If, by some tragedy that company whose stock you now own doesn’t make it out of this recession, your money goes down the drain with it.
However, let’s say they’re a stable company and are simply witnessing their share of the hardship. Once the markets sort themselves out, their stock should climb back into positive territory where you might be able to earn 6,10, even 20% or more. The challenge with this strategy is that you’re putting your money at risk. It may work out for you and hopefully it does, but on the other hand it may not.
The guaranteed investment vehicles like Manulife’s Income Plus or Sun Life’s Sun Wise Elite Plus offer you middle ground. For a small percentage fee, these companies use their insurance power to protect your investments so you can never lose the money you put into them. Because of the fee they take, it’s highly unlikely you’ll see the high rates of return that stocks can deliver – but on the flip side you won’t be dished out with any of the negative returns and losses those same stocks may throw at you.
It’s time to stand up and walk tall. Guaranteed investments will help you take the right steps to protect your money, mitigate risk, and best of all, maximize the opportunities around you so that you’re thriving, when the markets turn around.
Mark Zlotnik has more than 25 years experience as a chartered accountant and advisor with ZLC Financial Group specializing in estate and financial planning. To speak with Mark, contact ZLC Financial Group today
