Variable annuities are on the rise, with total sales topping $37.3 billion in the second quarter of 2013. That’s up 7.8 percent from the year’s first quarter. Read on to discover why so many savvy investors are putting their money into variable annuities.
Variable Annuities Don’t Lock You In to Your Investments
Variable annuities offer a diverse range of investment options. You can typically choose to put a percentage of your money into stocks, bonds, and money market instruments, or diversify your portfolio with a combination of these. The value of your variable annuity will depend on how these investments perform.
One of the great advantages of variable annuities is the ability to monitor your investments and move them around to maximize your earning potential. Insurers often charge transfer fees to make these changes, but if you’re smart your investment decisions can offset these costs.
Variable Annuities are Tax-Deferred
A variable annuity is made up of series of investments and an insurance contract which looks to protect you from financial hardship. Amongst other things, this insurance contract states that the tax on your investment earnings will be deferred. Put simply, you won’t pay taxes on your investment until your variable annuity enters the payout phase. You also won’t be taxed when you transfer your money from one investment type to another, although you may be liable for transfer fees.
Variable annuities are often criticized for their high fees, but the benefits of the tax deferral can outweigh these charges if you’re making a long-term investment. That makes them an attractive option for anyone planning for their retirement. Continue reading 5 Reasons to Buy a Variable Annuity
My husband loves collectibles. He has bought nearly every action figure associated with the Lord of the Rings movies. For his birthday last year, he insisted that I get him nothing; instead, he opted to buy a high-end Batman statue/figure. He’s already decided to forgo Christmas in favor of a Darth Vader statue from the same company.
One of his justifications for spending on collectibles is that it’s sort of an “investment.” After all, collectibles can be worth a lot of money down the road, right? (Personally, I don’t care if he spends on them, as long as he keeps it to what we can afford, but he likes to have a rationalization for his spending.)
Unfortunately, how much a collectible is worth later doesn’t depend on its popularity now, or even its “cool” factor. Whether you collect sports cards, movie cards, action figures, or Beanie Babies, here are some things to keep in mind before you “invest” in collectibles:
Is It Mass Produced?
The reality of any collectible is this: The more there are, the less valuable it is. Rarity matters when it comes to collectibles. There’s a Magic the Gathering card that goes for more than $800 in some circles — because it’s rare. And the label “Limited Edition” may not be enough to determine rarity. In some cases, there are still millions of “limited edition” collectibles produced and sold.
Some of the collectibles my husband has are rare. Consequently, they are likely to go up in price. He has one international LOTR scene set that has already doubled in “value” since he bought it. But just because it’s worth more now doesn’t mean that it will still be worth as much later.
Someone Needs to Be Willing to Pay
What happens when the market drops out? At the height of the Beanie Babies craze, people were paying insane amounts of money for little plush toys. Unfortunately, the market dropped soon. Eventually they stopped being the “must have” toy. Now you can get them for less than $5 on eBay. While some versions are still expensive, the demand in general just isn’t there — and that means that they are no longer as valuable as they once were.
This is a possibility with any collectible that you purchase. If you plan to purchase a collectible for investing purposes, you need to consider demand, and realize that you will only get what someone, somewhere is willing to pay.
Keep it in Good Condition
Because my husband is a collector, he cringes at my son’s habits. My son loves Legos, and Lego sets. He has quite a few Star Wars and Harry Potter themed sets. And mini-figures (including some that go for more than $20 apiece). Of course, my son is a 10-year-old boy. He opens the boxes and puts together sets. Some of the older sets have even been mixed around. Mini-figures are missing heads and arms. My husband knows that the Lego sets won’t be worth as much later on as a result.
If you expect to make money later on, you need to keep your collectibles in good condition — preferably in “mint” condition. If you can manage to hit on a rare item that people will want later, and if you can keep it in near-perfect condition for a few years, a collectible can be a decent investment.
What do you think? Do you view collectibles as investments?
When we think of investments, many of us think in terms of what we are doing with our money. However, money isn’t the only resource available to you. You also have your time and your abilities, and you can decide how to use those resources to improve your financial situation — even though you aren’t directly investing money.
Here are some ways that non-financial investments can help your financial situation:
Invest in Relationships
Who do you know? If you need help with something, or if you want a little help getting a job later, do you have someone you can turn to?
Investing in relationships can bring you a number of benefits, including some that are financial. When you take the time to network, you have the chance to build business and career relationships that can bring you more money down the road. Whether you work to develop a good professional relationship with your boss, or you look for a mentor outside your “regular” job, the right relationships can help you improve your financial situation in the long run.
You never know when someone you meet through your charity work, or through a book club will provide you with a tip on a new job opening. Plus, networking can connect you with those who can give you good advice about building your business more effectively, or even tips on better managing your money. Pay attention to the relationships you are developing, and recognize that a little time well spent can pay big dividends.
Invest in Developing Marketable Skills
Think about how you could make yourself more marketable. Consider the skills that could make you more attractive to bosses, clients, or investors. Whether you are looking for a promotion, a raise, or funding for a business startup, you need to show that you have the skills to make things happen.
Once you know what skills you need to develop, work on those things. This can include developing better speaking or writing skills so that you are able to get your ideas across more effectively, or persuade others to provide you with funding. You can develop a knowledge and a knack for marketing and apply that to whatever you are working on.
When you invest in yourself, developing new skills, knowledge, and expertise, you put yourself in a position to earn more money. Plus, developing the right skills can help you better manage that money as well.
Invest in Self-Improvement
Often, we buy things to fulfill some sort of need that we have. However, in some cases, you can save money when you focus on self-improvement instead. Look for ways to invest your time and abilities in doing the things you enjoy, and finding contentment. If you are happy spending time with your family, there is no need to buy a lot of fancy gadgets. If you enjoy spending time outdoors, you can go for bike rides, jobs, hikes, or engage in other activities that prevent the need to spend money on a gym membership.
When you are satisfied with the progress you are making as a person, there is less temptation to buy things to supply a lack. That can save you money over time, and improve your overall financial situation.
What are some of the non-financial ways you invest your time and effort?
One of the trickiest aspects of investing is know which assets to choose. This can be a daunting task, since if you pick wrong, you end up losing money.
There’s always a risk that you will lose money when you decide to invest. However, you can reduce your likelihood of loss by carefully choosing solid investments. Whether you want to put investments into your TFSA, or whether you are just looking for a way to grow your wealth, the right assets can be a great help to your portfolio.
If you want help picking assets most likely to offer decent returns over time, you can use fundamental analysis.
What is Fundamental Analysis?
Basically, fundamental analysis is a method of looking at the basic underpinnings of an investment. It takes a look at the factors that are most likely to influence the “big picture” of an asset. Often, fundamental analysis involves paying attention to factors like:
- P/E ratio (particularly in terms of stock)
- The way management runs the company
- Profit margins
- Where the company fits in relation to competition
- Supply and demand (especially in terms of commodities)
- Political issues that can affect an asset
- Economic factors influencing an asset (especially in terms of currencies)
Consider the “bottom line” issues that are most likely to influence an asset. Fundamental analysis can be used whether you are trading currencies, investing in individual stocks, trading commodity futures, or investing in funds.
How Fundamental Analysis Can Help
Unlike technical analysis, which deals strictly with price action, fundamental analysis takes a look at qualitative factors that offer insights into an asset’s potential. Technical analysis looks for trends in prices, tries to identify patterns, and then predict which investments will do well based solely on the patterns seen in past price action. Fundamental analysis is about identifying the items that give an asset staying power over time.
If a stock has an attractive P/E ratio, competent management, and reasonable profit margins, as well as potential for growth in its industry, chances are that it is a fundamentally sound investment. If conditions in a country are such that there is stability, and a potential for modest and sustained economic growth, a currency might be expected to perform well.
Assets with strong fundamentals are more likely to do well than their counterparts with shaky fundamentals. If an investment is supported by a solid base, it makes sense to think that it will do well in the future. Choosing investments with good fundamentals can be a way to help your portfolio perform well over time. You might not see amazing returns, but you are likely to see modest and consistent gains over time. This can be especially true with dividend stocks.
There’s no way to guarantee that your investment choices will be winners all the time. An element of risk always exists, and you could lose money no matter how careful you are. However, fundamental analysis gives you something to go on, and you can use it to help you find assets that are likely to be good long-term bets.