Risk reduction
June 16, 2020 by Keith Singer, JD CFP
Despite the fact that the economy is still a shell of what it was prior to COVID-19, both the S&P 500 and NASDAQ 100 are now positive for the year. The markets seem to think everything is going to work out just fine. If you are not so sure about that, there are ways to take less risk with your investments. Currently buffered annuities are allowing investors to earn the full returns of the S&P 500 with a 20% buffer. This means that after six years if the S&P 500 is up the investor gets the full appreciation of the index but the product makes the investor immune from the first 20% of decrease in the index value.
If you are comfortable with the credit risk of a major bank like Citibank or Barclay’s, you can get approximately 30% downside protection with a structured note. Structured notes are offered by both brokers who get paid a commission and fiduciary advisers who receive portfolio management fees and do not receive a commission. Structured notes that do not pay commissions to the broker can have much more favorable terms.
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