Investors are starting to embrace the financial security that the regulated insurance industry provides. They applaud the idea of these multi-billion dollar institutions having total assets that outweigh their total liabilities.
I remember as a child driving on a four day road trip (one way) every summer. Wherever our destination was set, I would always watch the mile markers on the side of the road. The closer we got to a big city, the more excited I became.
Driving by the skyline of a major city always fascinated me, and still does to some extent. To me those skyscrapers were the financial pillars of the sky. I remember being awestruck as a child knowing, somehow, that these corporations represented the financial strength of our country.
You know — the good old days, when terms like bear market
or global recession
weren’t a common part of a child’s vocabulary.
Today when I drive by a skyline, different thoughts come to mind. I wonder how many of those buildings have negative equity, or how many empty offices there are compared to five years ago. Or how many of those buildings are approaching foreclosure.
I wonder if the banks and other businesses that occupy these buildings will still be around in five years. Given both the uncertainty over the last decade and today’s descending global market, I am afraid I’m not going to like the answers.
Unfortunately, in a bear market, volatility
and uncertainty become familiar thoughts. These are the same unknowns that plague our market with instability. It’s no secret that in the long run, with excessive volatility, the investor ultimately suffers the losses. Just like it’s no secret that the last 10 years has been a lost decade. Because of this, investors seem to be frantically asking, “What do I do now?”
For these reasons, many investors are turning to the insurance industry for financial results the stock market
has failed to offer, i.e., eliminating market volatility, participating in moderate returns, etc. The insurance industry can take away the uncertainties and replace them with financial security, or what I like to call sleep insurance
Investors are starting to embrace the financial security that the regulated insurance industry
provides. They applaud the idea of these multi-billion dollar institutions having total assets that outweigh their total liabilities. Investors are taking comfort in knowing that insurance companies will not leverage their assets
in order to provide financial services they cannot adhere to, thus helping to protect against toxic assets.
Because of these practices within the insurance industry, concepts such as indexing and annual reset are reassuring investors that their future goals will become a reality.
Investors every day are separating themselves from many investment banks
that continue to leverage assets. Many portfolios have had negative returns or have only broken even over the last decade; events that today’s investors are not willing to tolerate moving forward.
The realization of the possibility of running out of money and being a burden to their loved ones is causing the sophisticated investors’ mindsets to change. The fear of outliving their money has surpassed the fear of death.
Steady, moderate returns and financial longevity are being exchanged for the peaks and valleys of the market. No longer are investors hoping to hit a home run in the market. They are content with hitting singles, focusing on increasing their batting average instead of the number of home runs in a season.
More investors are starting to realize that by eliminating the big drop offs in the market and embracing a moderate return, they can achieve their financial goals
. Investors are welcoming an ideology based on financial certainty within an insecure financial world.
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