When stocks are booming, as mine were the last couple of years, annuity looks like a bad investment. When stocks are crashing as they have been lately, annuity seems like a brilliant position. Sadly, the person with a balanced portfolio is always making less that the person with an unbalanced portfolio.
I weathered a lot of market downturns when I was young. That was not a problem because I had a lifetime to recover. A crash in retirement can be a serious problem for a retiree whose savings are not diversified. I, for one, do not believe the current downturn is over. I continue to be happy that I have some annuity to protect me if this current downturn continues.
In watching the stock market casually over most of a lifetime, I observe that when any stock or group of stocks are overvalued compared to their earnings, there will be a crash. I think it is important to know the difference between investing and speculating. If you buy a security because you think the company is strong and growing, and will return profit from new sales, that is investing. If you buy a company that is overpriced because you think other people will drive up the price of your stock, that is speculation. Speculating is fine, if you are smart enough to sell before the crash. Only a fool expects the price of an overvalued stock to continue to go up forever. But, as recent history shows, a lot of fools spend their money on overpriced stocks.
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