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Guarding Your Wealth for Senior Citizens
Factoring Terrorism into Investment Decisions:
Remembering 9/11
By Jeffrey D. Voudrie, CFP
September 13, 2006 - This week marked the 5-year
anniversary of the terrorist attacks of September 11th, 2001. It is a
tragic day that none can forget. And it is a day that should continue to
affect our investment decisions. Read on to find out how.
Unfortunately, terrorism is here to stay. Both at
home and abroad, militant Muslim terrorists will continue to seek the
destruction of democracy and the free world. While our government is
striving to protect our national interests from attack, it’s our
responsibility to do what we can to protect our investment portfolios
from the effects of terrorism.
We mustn’t become complacent when factoring the
risks associated with terrorism into our investment decisions. The fact
that there hasn’t been a successful attack on our shores in the last
five years doesn’t mean the threat to our investment portfolios is over.
Proper investment choice is essential in protecting
your nest egg. But beware. There are many products being pitched to
investors that are designed to create a sense of security…but it’s a
false sense of security. Using them may not protect you as you think.
For instance, products like equity-indexed
annuities are supposed to protect you from risk. But what if a terrorist
attack affects the economy or your personal situation such that you need
access to your money? You won’t be able to get at it without needlessly
losing a big chunk of money to surrender penalties.
There are riders available for variable annuities
that are sold as guaranteeing you will earn a 6% or 7% return regardless
of what happens to the value of the underlying funds. But that’s not
really how they work.
There isn’t an insurance company on this planet
that can guarantee a return of 7% on your money in a variable annuity.
Invariably, the 7% promised will include the return of your principal,
not return on your principal. Moreover, you have to convert the annuity
to a stream of payments over your lifetime in order to receive this
benefit. That doesn’t help you if you need your money.
Mutual funds carry their own added risk as well,
since they can only be bought and sold at the end-of-day price. If a
terrorist attack occurs in the morning and the markets drop throughout
the day, you can’t move your money to safety until the end-of-day. And
the markets may be shut down by then.
It is vital that you maintain your ability to
access and quickly sell your investments if you need to. There are
countless investment options that provide this flexibility so it’s
senseless to give it up.
Terrorism risk should also affect the strategy used
to manage your investments. The vast majority of advisors and investors
adhere to a buy and hold strategy. Its proponents say that, over time,
the markets will recover if you hang on. The question is how many years
will it take to recover? Those who followed this advice in 2000 and 2001
still haven’t recovered their losses. Retirees and near-retirees can’t
afford that risk. Don’t let anyone keep you from protecting your
hard-earned money.
Obviously, there are some industries that haven’t
fared well in today’s terrorist environment, and would suffer should
another domestic attack occur. Airlines and tourist-related companies
would likely see the value of their stocks decline significantly.
There are ways to profit from terrorism risk, but
you must do so wisely. For instance, energy prices will continue to be
affected due to potential supply disruptions. Owning select
energy-related stocks will allow you to profit from this.
Instead of choosing large, international companies,
I suggest selecting those that operate locally or regionally. That way
you get the benefit of rising energy prices without the risk of an
attack affecting the company’s assets. Canadian energy-related trusts
are one example.
There are many other industries that can provide a
good return while reducing your terrorism exposure. For instance, I
utilize rural telephone carriers, apartment management companies,
companies that make and sell ice and ones that operate coin laundries.
They all pay very healthy dividends and should be little affected should
the unthinkable happen.
Don’t live in fear, but be wise and diligent. By
carefully choosing your investment products, management strategy and
industries you invest in, you will help insulate your portfolio.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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