1. The stock market averages a 7.26% gain per year. Have you ever heard that? If this were true, consider this: If $1,000 was placed in the Stock Market in 2009, and the market averaged 7.26% per year, the end result in 2015 would have been $1,255,000.
But the REAL number is much lower, $112,445. Why is that? Because what investors are never told is that in getting those numbers, “The Street” never factors in the NEGATIVE numbers, the multiple years when the market is down!! That’s why you can be “up” in the market for the last five years, but if you were down in the previous years, you’re still at even money, if you’re lucky.
If a portfolio is worth $100 but loses 50%, it is now worth $50. However, if it then gains 50%, it is now worth only $75 ($50 x 50% = 25 $50 + $25 = $75). So if the market loses 50%, which it does every 11 years, it must then gain 100% for investors to merely break even. This is not a good situation.
2. “It’s ok the Market was down this year, it will come back.” This is something that we’ve been programmed to believe, and it simply isn’t true. Warren Buffet’s #1 rule of investing is “DON’T LOSE MONEY”!
What if you were planning to retire at the end of the year, but the market has one of its many "corrections" and you’ve lost half or more of your money? Would this be ok? Could you still retire? How long would it take to make that money back? The average time period to get “back to zero” after a 47% crash is 5 years. Is that too long? For many, the answer is “yes”.
3. Having Different Stocks Diversifies Your Portfolio: Watch what happens to your particular stock when there is seemingly unrelated bad news. It goes down. Why should Apple stock drop if the Greeks can’t repay their loans? Are the Greeks huge importers of iPhones? Probably not. When the market crashes, all stocks go with it.
No, true diversification means having multiple investment vehicles/asset classes in your portfolio. 80% of all high net worth individuals have investments in alternative assets such as life settlements with Greenrock Life Group. Why don’t you?
Remember, life settlements are the only TRUE non-correlated investment. You get your contractual payout, no matter what, no matter when. Knowing ahead of time how much the payout is helps investors sleep at night.