Build a portfolio that weathers market shifts: An annuity can provide a safety net when diversification isn’t enough.

Creating a portfolio that can weather market shifts can be difficult, especially during times of economic uncertainty. An annuity provides an additional layer of protection against financial losses and can be a valuable component in any investment plan.

Investing isn’t as simple as we once thought it was. It’s not just a matter of buying stock in a company and waiting for it to appreciate. Modern-day investing requires a more nuanced approach that involves a range of asset classes, including annuities.

A prudent advisor worth their salt will advise their clients to be mindful of their retirement portfolios’ allocation. And timing is always a major factor, as market shifts can cause significant disruptions. You’ve heard the old ‘buy-and-hold’ a thousand times… buy-and-hold is designed for accumulation during your working years, but what about an exit strategy for retirement?

Introducing annuities to your retirement portfolio can provide the necessary safety that diversification can’t.

Annuities offer a level of predictability that not many other asset classes do. While stocks, bonds, and mutual funds can offer substantial returns, times of extreme market volatility can quickly derail returns. An annuity, on the other hand, offers a set amount of predictable income based on the terms of the annuity contract, providing some peace of mind in retirement. Annuities are typically used as part of retirement planning and can provide financial stability through decades-long withdrawals.

hedge against longevity risk.

When market volatility strikes, annuities can offer a much-needed safety net. They provide a steady, secure income stream independent of market fluctuations. This attribute is particularly beneficial in retirement when people often rely on this stream to pay for living expenses.

Living longer than anticipated can be a blessing, except when retirement income funds run out of money. Even if a well diversified portfolio provides a dependable income stream, it may not keep up with the expenses associated with an extended lifespan. An annuity can provide a consistent and guaranteed income stream that covers living costs even if retirement goes longer than expected.

a conservative asset class.

Annuities are a conservative type of investment, which is precisely what many investors require during their golden years. While diversification and other investment tactics provide a degree of safety, annuities can ensure that income remains steady, regardless of market conditions.

An annuity’s value lies in its ability to protect investors from market downturns by guaranteeing steady payments regardless of what happens in the stock market. It also provides tax benefits since payouts are taxed gradually over time instead of all at once as with other investments such as stocks or mutual funds. Additionally, most annuities come with death benefits which guarantee that heirs will receive any remaining balance upon the investor’s passing.

By investing in an annuity alongside other investment vehicles such as stocks, bonds, or mutual funds, investors can create a balanced portfolio that is less vulnerable to dramatic changes in the stock market yet still has the potential for growth over time. Though investing in different types of assets carries certain risks, pairing these investments with an annuity ensures that you have some level of protection against major drops in your portfolio value should conditions change suddenly or unexpectedly.

In conclusion: Investing requires careful consideration, particularly when aiming to withstand market upheavals. A diversified portfolio can offer some degree of protection, but annuities can provide a guaranteed income stream that makes all the difference in harsh market conditions.

By supplementing your investment portfolio with an annuity, you’ll have access to a reliable source of income that takes care of your financial needs, regardless of market volatility.

Our Concierge Client Team is here to help you reach your financial goals — Learn more about our unique approach, here.

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November // 2023

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December // 2023

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