We have already discussed how investors typically rush in when prices are high and sell when prices are low. It's just human psychology. Now they are doing it again.
Consider this from National Underwriter:
Two new studies show fixed annuity sales were significantly higher in the first quarter than they were in the first quarter of 2008.
...
The surge was due to a 74% sales increase for fixed annuities, from $25 billion in first quarter 2008 to $36 billion in the comparable period of 2009, LIMRA, Windsor, Conn., says.
Variable annuities sold just $30.1 billion in the first quarter of this year, in sharp contrast to first quarter 2008, when VA contracts outsold FA contracts by $42 billion to $20.5 billion.
Consumers’ recent preference for fixed products was a result of the unstable stock market and a desire for guaranteed rates of return, says Joe Montminy, director of annuity research at LIMRA.
Sales of variable annuities showed double-digit declines for the fourth straight quarter, LIMRA says.
Sales increased for all fixed deferred annuity product-types in the first quarter of 2009, LIMRA found.
...
Comparable results for fixed products were found in another study, from Beacon Research Inc., Evanston, Ill.
Beacon’s Fixed Annuity Premium Study estimates U.S. sales of fixed annuities amounted to about $35 billion in the first quarter of 2009, up 78% from the comparable period a year earlier.
There are legitimate places in financial planning for fixed rate annuities. I am not denigrating an entire product here. But what the article is describing is panicky herd behavior, pure and simple. These investors are likely buying high (low fixed rates) and selling low (when rates rise).And that is the road to investing ruin.
good sharing post.
ReplyDeletesell annuity