Asset protection comes in many forms and while there is no “one size fits all” strategy that meets everyone’s needs, most strategies contain some common elements. Fundamentally, asset protection is the number one priority in our financial planning philosophy here at Focused Financial Solutions. Why is this?

Very simply put, avoiding loss of assets in down years and growing them at a competitive rate in up years will always yield superior results over the long term. Yet most people are unaware of the opportunities that exist. Let’s look at 2 illustrations:

The Power of Protection

Everyone knows that the stock market goes up and down and that the S&P 500 is regarded as a the standard measure of U.S. market performance. When illustrating performance, most funds compare themselves to the performance of the S&P 500. What is less commonly recognized is that the number of down market days vastly outnumber the number of up market days.

The graphic to the right illustrates how huge the difference can be in an investment by avoiding losses.

Three different investment vehicles were used to illustrate the point, all subject to two restrictions: 1) each must use the same investment style for the entire period, and 2) each cannot touch money during the investment period.

#1 – Invested in one year U.S. Treasury Bills. On New Year’s Day of the year 2000, the $1,000 invested in T-bills had grown to $15,393 over the 50 years investment period.

#2 – Invested in an index that became the Standard & Poor’s 500 index. In fifty years the starting point of $1,000 became an end point of $87,669.

#3 – Used an S&P 500 index with a difference. While the account recognized any years with positive index movements it treated down years as years with zero growth. In fifty years these positive reset years resulted in $1,000 becoming $389,396.

No one will be surprised that treating the down years as years with zero growth will result in a greater accumulation of wealth. What is startling, however, is just how tremendous that difference is — in this particular illustration, a difference of over 444%!!!

Is this a realistic investment possibility? Yes in that you absolutely can avoid market losses while participating in market gains. No in that there are limitations to the gains (though this is more than compensated for by avoiding the losses). Let’s look at an illustration that is a realistic investment opportunity.

On the same deposit amount of $100,000 the protected account returned $94,804 versus $31,351 for the non-protected account, a ROI more than 300% greater. Imagine if your retirement accounts had never suffered any losses. How much more money would you have accumulated and working for you today?

Of course you can continue to do what you have been doing. After all, you have lost money before; you can get through it again. You have time for that investment that went from $200,000 to $100,000 (a loss of 50%) to now gain 100% (double) in order to just get back to even, don’t you? You can endure risk of further loss, can’t you? You can buck the trend and beat the odds, right?

However…if you like the idea of:

  • Guaranteed principal protection
  • Tax-deferred growth
  • Avoiding probate
  • Annual lock-in of earnings
  • Income-for-life options
  • Tax-free distribution options

Contact us today!