I have recently noticed a plethora of radio and TV ads pushing annuities and gold investments. There is, I think, a close correlation between turbulence in the financial news and ads for these “shelters“ for your money. It is true that the level of uncertainty in the financial markets and the economy are at an elevated level but does that warrant completely “throwing in the towel“, settling for less and giving up control of your investments?
Financial markets are cyclical and go through periods of consolidation and regurgitation. As long as you (or your advisor) have a defensive playbook for dealing with these periods of higher volatility, you should not be subject to the fear being promoted by these product salespeople. You should have already dialed the risk down in your portfolio in order to avoid excessive loss in your account value. It is also true that gold can be acquired in your brokerage accounts and the indexes used to support the annuity “gains” can also be held in your account. There is no reason to move your account to another type of custodian (insurance company or gold trust).
The analogy that comes to mind is this: you’re in a jumbo jet flying to wherever and the air gets a little turbulent so you asked the flight attendant for a parachute and to arrange for an Amtrak train on the ground to finish the trip. Oh, and by the way, if you cancel the train or get off before you reach the destination, there is up to a 10% (of your principal) penalty. There is also a fee getting on the train and there is another fee for every small town you pass.
In the case of the annuities, they might entice you to get on their particular “train” by offering a 10, 15, or even 25% “bonus” (pretty ridiculous but some people fall for it) on your hypothetical "income benefit amount". Just remember, these companies are in the business of making money, not giving it away. Beware of the fine print.
I do not like using the phrase “just hang in there” or “buy and hold” when the markets get choppy (regional banks this year, for example). Significant risks in those areas should be avoided. And, if your advisor is paying attention, it would have been. I am reminded of one of my favorite quotes from Yogi Berra, “You can observe a lot, just by looking”. So, staying current on market and economic trends is very important. Maybe more than “quarterly rebalancing” is required to take care of your money.
I do still believe that the stock (and sometimes bonds, commodities or metals, among others) are the best assets to own over long periods of time. Make sure you (or your advisor) is making adjustments and taking the appropriate amount of caution. But staying on board will be a better long-term solution and soon the ride will be smooth again and you’ll be glad you didn’t jump.