Losing money in the stock market can be a daunting experience. it’s important to remember that with the right strategy, you can recover from losses and continue to grow your wealth. One way to do this is by using Indexed Universal Life (IUL) insurance. IULs offers a unique way to avoid the risks of the stock market while still earning a competitive return on your investment.
If you lose 20% in the stock market, you would need to earn approximately 25% to get back to where you were before the loss. This can be a challenging goal to achieve, especially in volatile market conditions. It can be difficult to predict which investments will perform well. However, with an IUL policy, you can benefit from market gains while avoiding the risks of market losses.
CONSIDER THIS FORMULA BELOW
To calculate the percentage return required to break even, you can use the following formula:
Break-even return = (1 / (1 – loss percentage)) – 1
For a 20% loss, the break-even return would be:
Break-even return = (1 / (1 – 0.20)) – 1 Break-even return = 1.25 – 1 Break-even return = 0.25 or 25%
Here’s how it works: an IUL policy offers a unique blend of insurance protection and investment growth potential. The policy is tied to a stock market index, such as the S&P 500.
The cash value of the policy grows based on the performance of the index. However, the policy is designed to protect against downside risk. That means that if the index has a negative return, your policy’s cash value won’t decline.
S&P 500 THE LAST 30 YEARS
Sure, here is a summary of the S&P 500 index gains and losses for each of the last 30 years in bullet points:
1991: Gain of 30.47%
1992: Gain of 7.62%
1993: Gain of 10.08%
1994: Gain of 1.32%
1995: Gain of 37.58%
1996: Gain of 22.96%
1997: Gain of 33.36%
1998: Gain of 28.34%
1999: Gain of 21.04%
2000: Loss of 9.10%
2001: Loss of 11.89%
2002: Loss of 22.10%
2003: Gain of 28.68%
2004: Gain of 10.88%
2005: Gain of 4.91%
2006: Gain of 15.79%
2007: Gain of 5.49%
2008: Loss of 37.00%
2009: Gain of 26.46%
2010: Gain of 15.06%
2011: Gain of 2.11%
2012: Gain of 16.00%
2013: Gain of 32.39%
2014: Gain of 13.69%
2015: Gain of 1.38%
2016: Gain of 11.96%
2017: Gain of 21.83%
2018: Loss of 6.24%
2019: Gain of 28.88%
2020: Gain of 16.26%
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The following table shows the percentage gain required to recover from various levels of loss:
| % Loss | % Gain Required to Break Even |
|---|---|
| 10% | 11.1% |
| 20% | 25.0% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
The gaining potential is so intriguing but as you can see, the losses could take years to get back that you may not have to get in back. Oh the volatility of the market!
On The Other Hand…
For example, let’s say you invest $100,000 in an IUL policy that’s tied to the S&P 500 index. In the first year, the index has a negative return of 10%, which would normally mean that you’d lose $10,000 in the stock market.
However, because your IUL policy is designed to protect against downside risk, your policy’s cash value won’t decline by that amount.
Instead, it might earn a minimum guaranteed return of 0% or a higher credited rate depending on the policy’s terms.
In the second year, let’s say the index has a positive return of 10%. This would mean that your policy’s cash value would grow based on that positive return, subject to any caps or floors that may apply to your policy.
Over time, this strategy can help you avoid the risks of market losses while still earning a competitive return on your investment. Additionally, an IUL policy can offer tax-free growth, tax-free withdrawals, and other benefits that can help you achieve your financial goals.
In summary, losing money in the stock market can be a setback, but it’s important to remember that with the right investment strategy, you can recover from losses and continue to grow your wealth. An Indexed Universal Life policy can offer a unique way to avoid the risks of the stock market while still earning a competitive return on your investment. By investing in an IUL policy, you can protect your money from market losses and benefit from market gains, all while enjoying tax-free growth and other valuable benefits.
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