Volatility In The Stock Market And How It Affects Your Retirement
For the past few years the stock market and the rest of the economy have been on a nice little run but the good times may be over. As every day passes the scope of the mortgage crisis seems to grow larger with even the federal government finally beginning to take notice.
Many analysts feel that we may be entering a period of increased volatility in the stock market. Last month we saw large movement swings on a day to day basis with the overall outcome being the largest one month loss for the market in five years. Credit concerns as well as volatility in the price of oil has Wall Street acting like a yo-yo.
This can have a large impact on your retirement planning and you should be concerned. There are many different choices out there from mutual funds, life insurance, and annuities. With the growing concern that the economy may be on a downward trend and its added elements of risk what you choose now could affect you for the rest of your life.
Should you go with a variable annuity and the possibility of higher returns or stick to the safe choice of a fixed annuity? For the most part a variable annuity would act like a mutual fund in that it is a diversified portfolio with the stock market as it’s underlying investment. A fixed annuity would be more like a diversified bond fund.
The variable annuity is a rather recent financial product that insurance companies came up with to combat the growing popularity of mutual funds. In effect it’s almost like a microcosm of the mortgage market. Fixed mortgages were around forever but then adjustable rate mortgages were introduced and became popular because of their so called “teaser” rates.
When the stock market was going up, the variable annuity seemed like the no-brainer but that’s not the case anymore. Some people may be wishing now that they had gone with the safe and steady fixed annuity and it’s guaranteed rate of return. Kind of like the people with ARM’s that wish they had gone with a fixed mortgage and it’s set payment schedule.
