When the Treadmill Is Bad For Your Health – Losing Years

BawldGuy Here: David’s post today is short, sweet, and covers a powerful concept — losing years. We all have losing years, it’s how life goes. The years following losses are akin to treadmills leading to nowhere. Below, you’ll see an excellent reason I nearly always insist on clients adding EIULs to their portfolio. David knows his stuff.

Written By — David Shafer

I have written about the benefits of investment returns not going negative. I thought I would demonstrate the advantage by looking at the last 5 years of returns for the S & P 500 index.

Here are the returns:

2005 4.91%
2006 15.79%
2007 5.49%
2008 (37%)
2009 26.46%

If you had invested $1000 on Jan. 1, 2005 at the end of 2009 you would have $1020.92. Note that 4 of those years were positive returns and only one was a negative return. (2008)

If you had invested in an EIUL with a ceiling of 16% and a floor of 0% [Minnesota Life] your returns would look like this:

2005 4.91%
2006 15.79%
2007 5.49%
2008 0%
2009 16%

After 5 years a $1000 investment would be worth $1,486.

Now that is with only one negative year in the data set. A more normal assumption would have 2 negative years in the set. The first 3 years of the decade 2000-2001-2002 all had negative returns for the index for a total of 4 in the decade.

Add on the peace of mind that comes with not seeing your account balance going down and you have a winning formula.

BawldGuy Here: The only thing of value I have to add is that losing years put you on a treadmill to nowhere ’till you’re back to where you began. Here’s some solid advice — contact David and talk about your situation. Then talk with me, and we’ll dovetail everything into a Purposeful Plan that makes sense.

Related posts:

1. Safety – Cash Reserves – Never a Losing Year
2. If There’s No Appreciation the Next 5 Years, How Will You Do?
3. San Diego Real Estate Investors Try To Avoid Saying ‘What Was I Thinkin” 5 Years From Now
4. Most Real Estate Flippers Are On A High Speed Treadmill With No Off Switch
5. What Can A Prudent Real Estate Investor Do In 20 Years With $55,000 Today And Some Periodic Cash?