What is indexing?

Combine safety with the opportunity of the market.


investments denver co

Are you aware of the unique strategy called “indexing,” which ensures you achieve safety and powerful growth on the same dollar at the same time? Through innovative financial tools, you can make sure your nest egg is kept safe from market declines. As a matter of fact, many of the products have guarantees that ensure that you never lose a dime of your principal to the market. The secret is to not place it where it can experience a loss. As you look ahead at the likelihood of increasing volatility in the market, it is important that you protect your nest egg—the engine that drives your retirement future—from negative volatility.

denver co investmentsOpportunity

Despite our current economy and gloomy predictions, there are still likely to be periods of tremendous opportunity in the market. What if it were possible to protect yourself from market downturns without having to make an emotional decision to buy, sell, or hold any one stock? What if you could take advantage of a strategy that automatically takes you out of harm’s way during bad years and positions you for opportunity during good ones? The secret is in linking safely to the market without putting your principal there. By “indexing” to the market instead of “owning” the market, you can link to indices safely on autopilot and lock in your gains without creating a taxable event. According to a recent study by the Wharton School of Finance, because of its ability to lock in credited interest in up years and not experience losses in the down years, some indexed products outperformed the broad market over the last 15 years! 1


Some will think this news sounds too good to be true. It is hard to believe that there are strategies available that could have protected you from the devastating downturns of the past. Certainly, most of us know how to keep our money safe: banks and insurance companies have been protecting our money for over a century in vehicles like Certificates of Deposit, Annuities, Bank Notes, and Life Insurance. Innovative enhancements to these same safe vehicles allow you to experience powerful growth in certain kinds of Certficates of Deposit, Annuities, and Life Insurance.

Starting in 1987 with Chase Manhattan’s first Market-Linked CD, banks have been able to protect principal while indexing returns to the market. In addition, CDs offer the powerful protection of the FDIC. The catch? Most indexed products are designed for long-term or nest egg money. Dollars that need to be spent in the near term are best placed elsewhere. For those who have the luxury of time, indexed vehicles like Market-Linked CDs, Indexed Annuities, and Indexed Universal Life Insurance have the ability to outperform the market over time without subjecting principal to market risk and market volatility. While Market-Linked CDs are backed by the FDIC, Indexed Annuities and Indexed Universal Life Insurance are regulated by other governmental agencies. These well-designed vehicles have many positives and two potential negatives. The first negative is that they don’t capture all the up of the market and the second is that they are not 100% liquid.

1 Geoffrey VanderPal, D.B.A, CFP, CLU, CFS, RFC; Jack Marrion; and David F. Babbel, Ph.D.; “Real-World Index Annuity Returns”; http://www.fpanet.org/journal/currentissue/tableofcontents/realworldindexannuityreturns/; accessed 01/01/2013

Investment advisory services provided through Tucker Asset Management LLC, a registered investment advisor.