Financial Freedom Double your trading account Published 1 year ago on May 24, 2017 By Jim Fredrickson The Money Makers Club now has 6 of 15 available seats. Learn more here! A recurrent theme in the queries put before me is how best to become wealthy by trading. We all want that of course. But if it was easy, every trader here would be wealthy already. The question I am asked is: “Can it be done if one starts small?” IMHO it can be done and the best way is to just focus on doubling. Doubling a trading account is not all that difficult, particularly in a bull market, if one is not too greedy and thereby making stupid mistakes that cause him/her to give their wins back to the market repeatedly. Think about it – start with a $1,000 account and just double it 10 times. You are at a million dollars. 1,000 1 2,000 2 4,000 3 8,000 4 16,000 5 32,000 6 64,000 7 128,000 8 256,000 9 512,000 10 1,024,000 If one is thinking the numbers involved, it sounds too difficult. Make $1,000,000 trading starting from $1,000??? No way, it seems… But is it inconceivable to turn $1,000 into $2,000? Not at all. Many people reading this column doubled their trading account last week. It’s just a matter of scale. Turning $64,000 into $128,000 is the same as turning $1,000 into $2,000. Several weeks ago my 12 year old son started a small trading account. Trying to get him excited about trading, I have been trying to teach him how trading is done. We have been focused upon this doubling process, without leverage. After some 5 weeks his account has doubled 4 times. 4 out of the 10 doubles are done. Only 6 more doubles to go and he will be “rich” by most people’s standards. Can he do that before the end of this year? My guess is yes. He just has to make sure he doesn’t get greedy and give his winnings back in some stupid leveraged trade that gets him margin called. Doubling a trading account in a bull market is not that hard, if you do not make a series of stupid (i.e., greedy) trades – right? Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink. Rate this post: Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way. (0 votes, average: 0.00 out of 5)You need to be a registered member to rate this. Loading... Jim Fredrickson 5 stars on average, based on 2 rated postsJim has an MBA from the University of Southern California. He has had a long career in both Corporate Finance and IT. Along the way he discovered that trading was a vehicle with great promise, but struggled for a long time without a mentor. After having been knocked down many times and having struggled to get back up, he had an epiphany and realized that geometry was a solution. He shares his experience here. If you do well as a result of suggestions made here, feel free to say thank you :) BTC: 1FUq3GB1Q8zz2JpuBr7YHzVBKnaWoxgmya Follow him on Twitter (@jimfred1276) or email him at jimfred1276 at gmail. Follow @HackedCom Feedback or Requests? Related Topics: Up Next Last Week’s Top Cannabis Stock Winners And May’s Stocks To Watch Don't Miss Mid-Cap ETFs: Growth And Stability At A Better Value You may like 18 Comments 18 Comments Joshnj82 May 24, 2017 at 3:48 pm Looking to adopt another son for a year or 2? Log in to Reply maleshkov May 24, 2017 at 3:52 pm I swear I have started with 2 btc in January 4th (my last savings and I had no job), the next day BTC dropped 30%. I had 1 btc for food and bills in cash. I was shocked and ruined both emotionally and physically for 2-3 days, then I girlfriend of mine call me with a job offer and I forgot about the investment. I didn’t have an account, just btc wallet. My salary was 0.5 btc per month at that time. It turned out to be disgusting experience with extreemly haughty young people and after a month and a half I was fired and continued trading on 9th of March with my 2 BTC. I found Jim’s hacked.com site and registered to receive the weekly paid bulletin for 28$, because there was a discount at that time. I made around 40% profit with lots of stress for a month and then I decided to stop trading, but investing by following Jim’s analysis. I decided to be patient for 2 months. The result was more than 1300% profit. It could have been much more, but I haven’t been patient from the very beginning and ade stupid mistake at the end. Thank you very much Jim. You are great analyst and investor. God bless you. Log in to Reply Jim Fredrickson May 25, 2017 at 6:50 am Thank you for the kind words. I’m glad you did well. Log in to Reply Dhananjay May 24, 2017 at 3:52 pm Thanks Jim for this post…I was following ur recommendations on cryptocurrency app and earned $350 from investment of $750 and then leveraged….sadly after one month I m on same amount again.. Will follow this recommendation in coming weeks..let’s C.. Thanks once again!! Log in to Reply Jim Fredrickson May 25, 2017 at 6:52 am Leverage is seductive. But has ruined more people than it made millionaires out of. This recent XRP correction would have stressed me out if I had been leveraged. But because I’m not, I just played darts, knowing that it will recover soon enough. No worries. Log in to Reply gullyfoyle May 24, 2017 at 8:34 pm Inspiring stuff. Let’s all the ride the bull and try not to fall off and get mauled by the bear. Log in to Reply thoth May 24, 2017 at 9:39 pm Sheez Dhananjay, I have been trading in Cryptos since 2013 and have never used leverage. especially when sites can crash or get DDOS and you get toasted through no fault of your own. Put $50 on a sports match if you wanna gamble I reakon Log in to Reply chorez May 25, 2017 at 9:30 am it seems hard for me two double up, when not using my full Bankroll. What percentage ofe your Bankroll do you invest in each trade? I tend to use 10% of my Trading bankroll. Is this too conservative? Log in to Reply Jim Fredrickson May 25, 2017 at 9:34 am Opinions will differ on this question. It will certainly take a lot longer to double your account if you are only trading 10% of the account. But it’s certainly safer. But if you are not leveraged, and you agree that this is the early stages of a bull market, then 10% seems overly conservative to me. Log in to Reply chorez May 25, 2017 at 9:41 am so what are the areas in which I should move. between 30-50%, depending on the variance that I suspect in a specific trade? Log in to Reply Jim Fredrickson May 25, 2017 at 10:56 am Thats your decision. But for me, I trade a much larger portion of my trading account in each trade (50-100%). But I don’t enter a trade unless I have what I believe to be a good reason to enter, and I exit as soon as I either see I was wrong, or as soon as I have gotten close to my target. I often put a stop loss and profit target in at the same time I enter the trade. I also only have 1 or 2 trades open at once, so I can focus. Like I say, opinions differ on this subject. Some would say I am too aggressive. I would agree with them, if I was new at this. Log in to Reply rtacconi May 25, 2017 at 10:42 am Jim, I read in your bio: “realized that geometry was a solution”. Where could I learn/study more about it? In your daily analysis, arcs, fib and other jargon obfuscate the meaning of your articles, where I could learn more? Thanks. Log in to Reply Jim Fredrickson May 26, 2017 at 12:59 am feel free to email me privately for more info Log in to Reply RF1508 May 25, 2017 at 10:18 pm Hi Jim, Thanks for the article. I guess I must be doing something wrong as I am struggling to double my account. (No problems with crypto but Issues with Forex) Now I feel stupid because your son (who is quite a bit younger as I am) can double his account. Can you enlighten our members here what the secret ingredients are? Also I am quite curious, you say you trade with quite a large portion of your trading account. Maybe input for a new article? Log in to Reply jhmurph3 May 26, 2017 at 12:39 am Funny, a couple of weeks ago I spoke with my daughter about trading. She is 10. Wasn’t sure how to approach this so I started with saying it is a series of pictures that tells a story. I have two accounts, one on Poloniex and one on Bittrex (and just opened a Kraken account). I gave her my Bittrex account. I mine a bit, Ethereum, Monero and Zcash, but learning how to trade. I guess I will see how we do… Thanks for the advice… Log in to Reply Ritesh Sheth May 26, 2017 at 4:03 am where can we find the weekly recommendation of crypto currency, sorry, I am new to hacked.com Log in to Reply rtacconi May 26, 2017 at 9:05 am @ritesh this is for crypto https://hacked.com/author/jim-fredrickson/ otherwise click top menu “Recommendations” link. Recommendations’ articles will be visible on the home page too. Log in to Reply johnathankelly June 4, 2017 at 8:46 pm Jim thanks for the article. I am new here and look forward to reading more. Log in to Reply You must be logged in to post a comment Login Leave a Reply Cancel replyYou must be logged in to post a comment. Financial Freedom Interview: Tax Strategies for Crypto Traders Published 4 months ago on May 20, 2018 By Fredrik Vold The Money Makers Club now has 6 of 15 available seats. Learn more here! With cryptocurrencies going mainstream, more and more people are asking how trading and holding of it should be reported to the tax authorities in their respective countries. And not only are people wondering, even the tax authorities themselves sometimes seem to have a hard time figuring out how they should deal with it. Although guidelines in many countries remain unclear, we do know that the authorities have stepped up their efforts in uncovering unreported crypto fortunes with new measures. One recent example is from California where a judge last year ordered Coinbase to turn over personal details on all accounts worth over $20,000 between the years 2013 and 2015, to the US Internal Revenue Service. According to current regulations in the US, the IRS considers cryptocurrency as “property” for tax purposes, meaning each and every transaction is in fact reportable and taxable. This includes trading from fiat to crypto as well as from one crypto to another crypto. For active traders and day traders, manually reporting this on forms to the IRS obviously involves a lot of work, something many people have complained loudly about in online discussion forums: The early days – “see no evil, hear no evil” In the early days of bitcoin and crypto trading, the number of people involved, and the amount of money it represented, was so small that the tax authorities didn’t bother looking much after it. Although everyone was, of course, technically required to report their holdings and profits, very few did. The tax authorities didn’t know anything about bitcoin, and the risk of getting caught was small. This first started to change after the dark web marketplace Silk Road was shut down, most recently in 2014. That’s when the IRS in particular first started to become aware of bitcoin, and became interested in figuring out ways to trace bitcoin payments that were used for illegal activities and tax evasion. Then came the extreme bull market of 2017, a lot more people got involved with crypto, and a lot of money was made in the market. And as always when someone is making a lot of money, the government wants its share of it. The tax situation today Today, taxes are again a hot topic of discussion among cryptocurrency investors, with many feeling anxious about previously unreported gains made in the crypto market. Andrew Henderson, founder of Nomad Capitalist, told Hacked.com that there is indeed a lot of confusion among crypto traders these days, in particular with regards to the new Trump tax reform in the US. “The number one issue people come to me with is obviously taxation. The new Trump tax reform in the US really screwed a lot of people, and now even intra-crypto trades are taxable,” Andrew explained. “The second problem I typically hear about from people in the crypto community is that they cannot participate in ICOs because they are living in the US.” “Many of these people say they are missing out on a lot of good investment opportunities because of that, and they want to find out what they can do to no longer be considered US Persons,” he added. Andrew, who has been advising people on offshore tax strategies since 2013, explains that the solution for most of these people is to go out and set up a base of operations somewhere outside of their home country. Unfortunately, he said, the old strategy of leaving one’s home country only to “become a resident of nowhere” is increasingly not working. In other words, people who want to invest in certain ICOs or lower their crypto tax bill therefore need to find a new country that is accepting of crypto and have low or zero capital gains tax. Is not reporting an option? When asked if crypto traders should even bother reporting all of their transactions and profits to the tax authorities, Andrew is pretty clear that at least people from Western countries, and the US in particular, should respect the taxman. He explains that the IRS in the US is “really aggressive,” and that there is a real risk they will bust anyone who tries to evade taxes. In addition, Andrew said, “you’re probably going to want to spend the money some day. If your crypto holdings by this time has grown into a lot of dollars, you’ll have a problem explaining where all that money came from if the tax man asks.” Going offshore Given the fact that US citizens are liable to pay taxes on their worldwide income, Andrew’s advise to big crypto traders is clear: “I think if you’re a US citizen, you might just want to consider not being one anymore.” Although this measure may sound extreme to a lot of people, the suggestion appears to be backed up by statistics. Each quarter, the IRS publishes a list of Americans who have renounced their citizenship in the quarter. According to the statistic, there has been a steady increase in the number of people who have renounced over the past decade, with 2017 being the first year to show a slight decline from the previous year since 2013. The United States is one of very few countries in the world that taxes its non-resident citizens on their global income. Unfortunately for many of the readers, non-US citizens will therefore have an easier time implementing some of the strategies for lowering their crypto tax bill. Residents of other high-tax countries such as the EU countries or Australia can in most cases simply declare themselves a tax non-resident in their home country by moving overseas and making sure they spend no more than a specified number of days each year in their home country. While some countries require their citizens to continue to file and pay taxes for a number of years after they moved out, other countries will consider those who have moved a non-resident for tax purposes right away. Because of all this, it’s important to distinguish between US citizens and citizens of other high-tax countries when it comes to regulations and taxes related to crypto. If you’re a US citizen, what it all comes down to is basically how big of a problem it is for you not to be able to participate in a lot of the ICOs that are coming out. If this means a significant monetary loss to you, it may well be worth it exploring options for relocating yourself. For citizens of other countries, moving abroad for a period of time can be an effective way to slash your crypto tax bill without having to completely cut ties with your home country and give up your passport. Featured image from VCG.com. Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink. Rate this post: Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way. (3 votes, average: 4.00 out of 5)You need to be a registered member to rate this. Loading... Fredrik Vold 4.3 stars on average, based on 37 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity. Follow @HackedCom Feedback or Requests? Continue Reading Financial Freedom Considerations For Choosing An Immediate Annuity Published 6 months ago on April 1, 2018 By Lester Coleman The Money Makers Club now has 6 of 15 available seats. Learn more here! When it comes time to retire, one method for receiving income from your savings is to purchase an immediate annuity. The purpose of an immediate annuity is to provide a regular payment over a certain period of time or over the investor’s lifetime. An immediate annuity can preserve a minimum level of income that you cannot outlive. Allocating a portion of your retirement money to an option that will provide income for life can make sense for many retirees. So how does an investor decide what immediate annuity to purchase? The scenarios discussed in this article apply in the United States. Readers are encouraged to consult their accountants about tax considerations related to buying annuities. It’s also important to consider that when earnings from an annuity are withdrawn, they will be taxed as ordinary income, no matter how long the owner has owned the account. Different Types Of Immediate Annuities Steve Vernon, a research scholar for the Stanford Center on Longevity, writing for CBS News’ “Money Watch,” noted that immediate annuities can be fixed, inflation adjusted and variable and guaranteed lifetime withdrawal benefit (GLWB). GLWB combines the features of traditional annuities and systematic withdrawals. Once you purchase a fixed or inflation adjusted immediate annuity, your payout is locked in, Vernon noted. Your payments will not be adjusted based on changes in capital markets. The monthly payout on a variable annuity, by contrast, will change based on the annuity’s stock and bond portfolio. The owner can modify the portfolio even after they start receiving payments. Vernon recommends keeping the stock allocation between one third and two thirds. When shopping for GMWB annuities, Vernon recommends annuities with management fees around 50 basis points or lower, and insurance fees round 100 basis points. Vernon encourages people to use online annuity purchase services like www.immediateannuities.com and Income Solutions and Immediateannuities.com to compare different immediate annuities. Immediate Fixed Annuity Considerations Steve Goldberg, an investment adviser writing in Kiplinger, thinks of an immediate fixed annuity as term life insurance in reverse, the longer you live, the better you do. The insurance company pools the premiums from thousands of its annuities and invests them primarily in bonds. The company also makes educated guesses about how long its annuity buyers will live. It then makes monthly payments to policyholders each month based upon both expected longevity and expected investment returns. In today’s low-interest-rate environment, that’s much better than an investor can do in all but the riskiest bonds, according to Goldberg. It’s also likely better than an investor can do if he put all his money into stocks. But there is a catch: With an annuity, you don’t get your money back, unless the buyer opts for what’s known as a “certain period annuity” or similar option. Additional features, however, usually bring additional costs. Goldberg believes immediate fixed annuities usually make sense only for retirees. The older the retiree, the fewer years the insurance company will have to pay the benefits – so the bigger the monthly checks. Immediate annuities seldom make sense for all of an investor’s money, Goldberg notes. Like Vernon, Goldberg suggests going to ImmediateAnnuities.com to compare different immediate annuities. Plug in the state you live in, your age and your gender, and the website provides quotes from numerous companies. How Immediate Annuities Are Bought There are three typical ways to purchase immediate annuities, according to Rich White, a financial writer writing in Investopedia. One method is the annuitization of a tax-deferred annuity. The purpose of a tax-deferred annuity, unlike an immediate annuity, is to build funds to create an income stream at a later date. Most tax-deferred annuities permit the account to be converted at some point in time to a guaranteed income stream. Another method is the lump sum payment, in which the investor’s funds are transferred to an insurance company to purchase a revenue stream. Oftentimes, the investor is using cash from a retirement plan distribution, lottery winnings or an award from a personal injury settlement. A third method is the terminal funding of a retirement plan. Some retirement plans offer annuity payouts. The plan in this case terminates its liability to the participant by transferring the participant’s funds to an insurance company. When retirement plans “pay out” in this manner, a “qualified immediate” annuity of offered for tax efficiency. These choices all present options. The owner of a tax-deferred annuity who wants to annuitize is not limited to the payout offered by the insurance company, White notes. The policyholder can shop payouts offered by competing companies and conduct a tax-free transfer to the company offering the best terms. This is known as a Section 1035 exchange. If a retirement plan offers a particular insurance company for terminal funding, the policyholder can shop for others and select the plan they find most suitable. An annuity payout over a fixed number of years that is purchased with a single sum can be converted to an annual interest rate equivalent, White noted. If, for example, the policyholder is quoted an annuity of $600 per month for 20 years in exchange for paying a premium of $10,000, an annuity rate calculator will find this payout converts to an annual interest rate of 3.96%. This rate can then be compared to other fixed-period annuity payouts, perhaps over longer or shorter periods, and also to rates available on bonds, money market funds or CDs. For a lifetime annuity payout, there is no fixed period to evaluate. Death could occur at any time, and the payments would discontinue. White recommends a good starting point is to use the annuitant’s life expectancy as the payout period. If a 67-year-old female is offered a lifetime payment of $600 per month for a $100,000 premium, her life expectancy would be 17.67 years, based on the 2007 Period Life Table published by the Social Security Administration. Immediate Annuity Payout Options One payout option for immediate annuities is income for a guaranteed period, which is also called “certain period annuity,” according to CNN Money, as noted in a previous article on annuities’ role in financial planning. This guarantees a specific payment for a specific time period. If the owner dies before the period ends, their beneficiary receives the remainder of the payments. Another option is lifetime payments that guarantee a payout for the owner as long as they are alive, but there is no survivor benefit. The payouts can be variable or fixed, depending on the type of annuity selected. The amount of the payout depends on the amount invested and the owner’s life expectancy. Still another payout option is life with a guaranteed period certain benefit, also known as “life with certain period.” The owner receives a guaranteed payout for life along with a period certain phase. If the owner dies during the certain period, the beneficiary continues to receive the payment for the remainder of that period. Joint and survivor annuity is one in which the beneficiary continues receiving payments for the rest of their life after the owner dies. Do Your Homework It is important to buy an annuity from a company that holds a top credit rating from the three leading agencies of U.S. insurance companies: A.M. Best, Moody’s and Standard & Poor’s. The considerations for shopping for an immediate annuity are extensive. Investors must spend their time comparing options. Many retirees will find it worth their time to work with a financial adviser. Those who seek the assistance of an insurance agent must keep in mind that insurance agents are paid commissions by the insurance companies offering the annuities. Investors have the option of working with a non-commissioned financial adviser. Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink. Rate this post: Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way. (1 votes, average: 3.00 out of 5)You need to be a registered member to rate this. Loading... Lester Coleman 3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments. Follow @HackedCom Feedback or Requests? Continue Reading Business Annuities Versus Mutual Funds: What’s Best For Retirement Planning? Published 6 months ago on March 18, 2018 By Lester Coleman The Money Makers Club now has 6 of 15 available seats. Learn more here! An annuity, a long-term contract between a buyer and an insurance company that allows the accumulation of funds on a tax-deferred basis for later payout in the form of a guaranteed income, can be part of a retirement plan, as discussed in last month’s article, “Do Annuities Have A Role In Retirement Planning?” However, it is important to weigh the advantages and disadvantages of owning an annuity against other investment options for retirement, such as mutual funds. Before investing, one should compare the annuity fee structure with regular no-load mutual funds. No-load mutual funds levy no sales commission or surrender charge and impose average annual expenses of less than 0.5% for index funds or around 1.5% for actively managed funds. It’s also important to consider that earnings from an annuity will be taxed as ordinary income when the earnings are withdrawn, no matter how long the policyholder has owned the account. The scenarios discussed in this article apply in the United States. Readers are encouraged to consult their accountants about tax considerations related to buying annuities. Annuities’ Advantages Annuities do have some important advantages over other investments in retirement planning. Payouts can be guaranteed for life, regardless of how much the account actually earns, and they often include a guaranteed death benefit. Income from stocks and mutual funds is not guaranteed, and there is no death benefit. With mutual funds, the investor pays in an amount that is invested in a number of stocks, bonds, or a mixture of both, to create a stream of retirement income from stock dividends and bond interest. While mutual funds use investment diversity to limit market risk, this is not a guarantee, according to Howard Kaye of Howard Kaye Insurance. Earnings can fluctuate significantly, and it is possible that no dividends or earnings will be paid out, especially if the principal is reduced. Annuities have other advantages as well. Unlike investments in tax-deferred retirement accounts, there is no limit on the amount that can be invested tax-deferred in an annuity, unless it is held inside a tax-deferred account, such as an IRA or a 401(k). Variable annuities offer the opportunity to earn more than the guaranteed payment, depending on the performance of the investments. A variable annuity is essentially a mutual fund inside of a tax-deferred insurance policy, according to Trust Point, a Wisconsin based wealth management firm. Investments are made within mutual funds or mutual-fund-type accounts offered by the particular annuity, and the earnings grow tax deferred until they’re withdrawn. Variable annuity investors can also switch from one investment to another within the annuity’s menu of choices without paying taxes. A mutual fund investor cannot switch among taxable mutual funds. Hence, annuity investors have more flexibility in adjusting their portfolios. Annuities’ Disadvantages Annuities are not without their disadvantages, however. The earnings from an annuity, when withdrawn, are subject to the ordinary income tax rate, which for many is higher than the long-term capital gains rate that one incurs in owning a mutual fund, according to Daniel Kurt, writing in Investopedia. If you buy a qualified annuity – that is, one you purchase with pretax dollars – you’ll have to pay ordinary income taxes on 100% of the disbursements you receive, Kurt noted. With a non-qualified annuity, some of the payment is considered a tax-free return of principal; only the earnings portion is subject to tax. Stock dividends, by contrast, will be taxed at the capital gains rate rather than as ordinary income. Trust Point offers the example of someone in a high-ticket tax bracket, who pays 39.6% on gains when they withdraw their money from their variable annuity, instead of the lower 15% or 20% long-term capital gains rates. This will be true regardless of whether the withdrawn dollars are a result of income dividends or capital gains distributions. In addition, variable annuities can hit the policyholders’ heirs with a big unexpected income tax bill. If a $25,000 investment grows to $100,000 over the years and the policyholder dies, their heirs will owe income taxes on $75,000. If the policyholder is in a lower tax bracket than their heirs, it might make sense for a retiree to take distributions before death if there are no surrender charges. In contrast, if they owned taxable mutual funds or other securities, the heirs would not have to pay taxes on the $75,000 in gains because taxable mutual funds enjoy a “stepped-up” basis at death for tax purposes, Trust Point noted. The tax treatment of annuities is one reason why Kurt encourages people to buy as much income protection as needed – that is, expenses minus whatever they receive from Social Security or a pension. That way, you can invest the rest of your assets in an account that benefits from the capital gains rate. The income guarantees of variable annuities add an expense that can clip the total return earned by the variable annuity investor, according to Trust Point. As with mutual funds, payments from variable annuities fluctuate up or down depending on the performance of the underlying investments. Fixed Indexed Annuities Another choice investors have is the fixed indexed annuity. These annuities use financial indexes as a benchmark for earnings. The funds in the annuity are not directly invested in the stock market. Instead, the earnings are based on the earnings within an index, such as S&P 500, Dow Jones Industrial Average, etc. (A fixed indexed annuity should not be confused with a fixed annuity, which provides a fixed amount every month for the rest of the annuitant’s life.) While fixed indexed annuities use stock market indexes as benchmarks for earnings, the investor’s funds are not directly invested in the stock market. Instead, the earnings are based on the earnings within an index. Like variable annuities, fixed index annuities have both advantages and disadvantages compared to mutual funds and other investments. While they offer a market-risk-free opportunity, fixed indexed annuities aren’t as liquid as cash, noted Kaye of Howard Kay Insurance. They are, however, more liquid than most CDs or bonds, Kaye noted. In fact, nearly all offer “free withdrawals” every year. Once the surrender period is over, all of the funds are fully liquid. Should the policy holder die during the annuity period, it’s possible that there won’t be much left for heirs. Such products are best suited for someone looking to supplement income and already has an estate plan in place for their heirs. The decision of whether to invest in a variable annuity, fixed indexed annuity or a taxable mutual fund will depend on individual factors such as age, expected lifetime, the reason for the investment, liquidity needs, fees, estate plan and the overall portfolio. Featured image courtesy of Shutterstock. Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink. Rate this post: Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way. (2 votes, average: 3.00 out of 5)You need to be a registered member to rate this. Loading... Lester Coleman 3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments. Follow @HackedCom Feedback or Requests? 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