August 6, 2009

Buy cheap insurance where you can find it

Despite the race by manufacturers to develop some sort of portfolio insurance to accompany retirement income products, it doesn't have to be complicated. In a nod to the tried-and-true, the Wall Street Journal's Brett Arends runs through the cost-effectiveness of a simple put-option strategy. It's particularly relevant given the lack of client confidence to test market waters. With Wall Street's recent run, offering a guard against further correction and false-bottoms will ease client fears at a time when they desperately need to re-accumulate assets.

"One thing that can hardly be stated often enough is that people on Wall Street really don't know what's going to happen next, even though they say they do," Arends writes. "In these circumstances it makes sense to spread your bets, and to look for cheap insurance where you can find it."

Obvious (we would hope), but well said.

Reprints Discuss this story
This is where the comments go.