Two financial market myths busted

Imagine if you could earn 10 percent on a $100,000 investment every year for the next three years. Then, in the fourth year, you lose 10 percent. Guess what your total average annual return for those four years would be? Answer: 4.5 percent. Granted, cap rates on variable annuities are historically low but for an investment that bears no stock market risk and yet captures the realistic upside of a volatile market, it’s a slam-dunk and your opportunity to redirect those lemmings.

Myth #2

Stay invested because the 10 best days in the stock market account for 50 percent of the gain from August 1993 to August 2010 and would have resulted in a hypothetical $100,000 investment growing to $324,330. If you missed being invested for those 10 best days, your hypothetical nest egg would have increased to only $156,354. On the other hand, had you been able to avoid the worst 10 days during the same time period, your $100,000 would have exploded in value to $692,693.

Which products are designed to avoid losses in the stock market and yet keep pace with inflation? The ones you sell. Emotion and discomfort are the guiding influences for most investors. You have the power and knowledge to better guide your clients. Help them see the best way to make money is not to lose money­—a simple concept apparently forgotten by the self-proclaimed and promoted mavens in the media.