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Newsletter

2013 1st Edition (Other Editions)

Equity investments (such as stocks or mutual funds) frequently leap forward, but occasionally fall back. Most investors would be pleased with gains in four of every five years. Do the occasional great years offset those with poor or negative return? This is a question frequently asked by people purchasing variable annuities and trying to contrast the level performance with stocks, mutual funds or variable annuities.

If you started with a $100,000 deposit, which strategy would produce a higher cash balance in five years?

… AND NOW THE RESULTS

The answer is that both of these strategies would produce exactly the same result - $147,000. What does this tell us?

  1. Consistency out-produces occasional brilliance
  2. Steady compounding offsets occasional poor results

This poses an important question, "Where is the justification for taking the much higher risk associated with equity investments?"

  1. As an investor, are you the tortoise or the hare
  2. Do you want to change your philosophy a bit

For illustrative purposes only. This is not intended to show a real performance of an actual investment or index.