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You can just as easily turn that last statement on it's head: No insurance company should assume that for their entire retirement portfolio they can produce in

by RyanZAG 14y ago

You can just as easily turn that last statement on it's head: No insurance company should assume that for their entire retirement portfolio they can produce inflation beating returns without risking significant capital loss and subsequent penury. The reason I can flip the argument is because, ultimately, the value of your investment is irrelevant. If you are investing $10 billion and earn 10%, or you invest $1 mil and earn 10% - you are still earning 10% in both events. It's just scare-mongering - you're saying to offload your risk and reward to someone else because they're so much better than you at it. However, there is very little proof that they really are better at it than just investing 50% in bonds and 50% in index funds. And, unfortunately, while you truly are offloading all of your reward, you are only offloading limited risk - and you are paying for the privilege. The financial industry as a whole does a wonderful job preying on fears for their own profit, and yes, I've worked in the financial industry.

cerebrum 14y ago
With your experience how would you invest your money. What suggestion would you give to someone who is not an expert in the area? Do you think value investing is a good idea?
Ntrails 14y ago
It's like you did not read a word I said. The insurance company are not attempting to make RPI + 4% - which is what the article recommends you must chase to live on. They are not attempting to retain the capital. The article is claiming that he can consistently make those returns ad infinitum - ignoring completely the risk of ruin. The insurance company simply assumes that overall their returns + the capital will cover the cost of the annuity over an average lifespan. They calculate this with a very low risk portfolio - because the capital costs of reserving against risky assets outweigh the benefits of chasing the returns. Of course you pay them for the privilege, I am not contending that. However - for you to claim that it is equally risky is complete rubbish, and once again you fail to understand that they are offering a very different prospect with different risks and far higher levels of surety.

by RyanZAG 14y ago

cerebrum 14y ago

With your experience how would you invest your money. What suggestion would you give to someone who is not an expert in the area? Do you think value investing is a good idea?

Ntrails 14y ago

It's like you did not read a word I said. The insurance company are not attempting to make RPI + 4% - which is what the article recommends you must chase to live on. They are not attempting to retain the capital. The article is claiming that he can consistently make those returns ad infinitum - ignoring completely the risk of ruin. The insurance company simply assumes that overall their returns + the capital will cover the cost of the annuity over an average lifespan. They calculate this with a very low risk portfolio - because the capital costs of reserving against risky assets outweigh the benefits of chasing the returns. Of course you pay them for the privilege, I am not contending that. However - for you to claim that it is equally risky is complete rubbish, and once again you fail to understand that they are offering a very different prospect with different risks and far higher levels of surety.