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A New Investing Product

09/29/2006 12:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Economist and investment pro Mark Skousen can always be counted on to look at investing and markets from a broad perspective. Today, he introduces investors to a new investment product that comes with a guarantee...


“I’ve discovered a fabulous new way to make money in the stock market without the risk. New investment products, called variable annuities with a ‘guaranteed minimum growth rider’ are offered by top US insurance companies, such as John Hancock, Hartford, Allstate, American Skandia, and Jackson National. They are a major improvement over the older stock annuities, as they are customized according to your needs and your ability to invest. Other benefits include:


Invest in practically any investment category—US stocks and bonds, energy plays, foreign stocks and bonds, money market funds, even emerging markets. Ability to switch between these investments. Invest without worrying about taxes. All taxes on gains (short- or long-term) are deferred until withdrawal (note; it is not an IRA). Your principal is guaranteed. Your account’s value can never fall; in fact, it will rise at least 5% a year. The value of your account is reset every year based on a) your choice of investment vehicles, or b) the value of your principal plus 5%, whichever is higher. This is called the automatic annual step-up plan. The investment also offers a death and annuity benefit.


“My favorite choice right now is Jackson National’s Perspective II, with the 5% life guard protector advantage. This is the #1 selling variable annuity on the market today.


“Perspective II gives you a choice of 65 mutual funds managed by Fidelity, Franklin Templeton, T. Rowe Price, J. P. Morgan, PIMCO, and Mellon Capital. Choose among small-cap, mid-cap, large-cap funds, both here and abroad, as well as bond funds, oil and gas, etc. They don’t offer a gold fund, or a bear fund; however, American Skandia/Prudential does offer these alternative funds. You can switch from one fund to another at any time without penalty.


“Naturally, the insurance company is going to take a cut to administer this plan and to make the guaranteed payouts. The cost of the Jackson National variable annuity is 3% a year, but the 5% guaranteed step-up is net of expenses. However, penalties exist for early withdrawals. Note; since variable annuities are not FDIC-insured, you need to check on the viability of the insurance company. Jackson National is top-rated A+ by A. M. Best and AA-rated by Standard & Poor’s. It is the 15 th ranked insurance company in the US with more than $50 billion in assets.”
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