When horse-drawn wagons journeyed their way up mountains in the old west, cowboys would put a “wheel-chock” behind the wagon wheels when they stopped to rest. Without brakes as we know them – that wheel chock – usually just a rock or a chunk of wood – could save a wagon from the sure disaster of crashing back down the hill.
Wouldn’t it be nice to have a financial wheel-chock for our investment accounts? Every time our account would move up in value we could put the financial wheel-chock in place so our account could never “roll” back downhill again.
If there were such a device, it would solve one dilemma that haunts investors and their advisors alike: When to sell a winning position and lock in gains?
- Sell too early, and we can miss out on gains that may continue to build – often for a long time.
- Sell too late and we may give back some of those gains. Even if we sell at the absolute top, we create another problem. How/when do we get our cash back into the game – earning money?
There is a way to put a financial wheel-chock underneath our gains – but only in certain kinds of products. Bank CD’s for example allow us to capture gains, lock them in, and continue to earn interest. Problem is, interest on bank CD’s is dismal – stuck at less than 1% for more than 5 years now.
Never fear – because certain insured products – namely life insurance and annuities have financial wheel-chock features. But importantly, they have much greater growth potential than their bank CD counterparts.
Many of these products grow cash at stock market-like levels, with complete downside protection and the ability to lock in gains. And when both principal and earnings are protected from loss, Einstein’s Ninth Wonder of the World – the magic of compound interest – can really do its thing.
Uninterrupted compound growth is financial rocket-fuel, and it is ONLY possible with these kinds of products.