<p>The only safe strategy I know of is holding an index fund or etf for extended periods of time.</p>
<ol>
<li><p>On Dec 1, 2011, the vix was at 27.63 and xiv was at 5.68. However, on Feb. 1, 2012, when the vix was almost exactly where it is now, xiv was at 8.71.</p></li>
<li><p>I have a lot invested in Tiaa traditional, and also a significant amount in an annuity product that is guaranteed to appreciate at 7% per year (with a possible equity kicker if EEM goes nuts). Nothing is completely safe, but those two products are about as safe as you can get–safer, in my view, then a long term index fund investment (remember Japan?)</p></li>
</ol>
<p>We’re not Japan. The market goes up over time always.</p>
<p>EMM1, You have an annuity that is guaranteed to appreciate 7 percent a year. What is the rate of return now? I would love to look at that product. The annuity is partially tied to emerging markets?</p>
<p>TIAA Traditional? So you have two annuities going? What happens when you die? Is there anything for heirs?</p>
<p>Uhhhh yeah. Japan is not safe. </p>
<p>Edit: Oops. Misunderstood what you wrote about the vix-xiv relationship. Strike that.</p>
<p>I’m going to run out and buy an ETF for dummies book to understand what you guys are talking about. I am so annoyed with attempting to trade mutual funds. I have to trade them 3 hours before the market closes (and anything can happen in 3 hours), and once you’ve sold them, you can’t go back into that fund for 2 months. Really frustrating. My 5 year personal rate of return has been 5.9%, not spectacular, but I think I could have done better if I could actually trade every now and then without so many restrictions.</p>
<p>The IBS comments this weekend are interesting.</p>
<ol>
<li><p>The annuity product is called ING Golden Select. There are two parts to the product. First, you choose a variable annuity portfolio for which (as usual) you pay a pretty significant fee. For an additional fee, you get the guaranteed 7% annual appreciation in the annuity value, which you can’t touch for at least 10 years. If you are relying on the annuity appreciation (rather than the value of the underlying portfolio), you can only take it out in either a standard annuity or in installment over at least 10 years.</p></li>
<li><p>In the case of the ING product, heirs get either the face value (not the annuity value) or the original amount invested, whichever is greater, unless you have converted the product to a standard annuity, in which case it will depend on the precise form of the annuity that you have chosen. I actually have two forms of TIAA (I’ve been doing this a long time). Under both versions, heirs will inherit full face value (one way or another) if I die before I retire. Under the earlier version, my current plan is to to the 10 installment option, (not spending it all in ten years, of course), which would </p></li>
</ol>
<p>mean the heirs collect if I die. Under the later version, you can get it all for two percent fee when you retire, which again is my current plan (in both cases, rolling the money into an IRA to avoid immediate taxes).</p>
<ol>
<li> The appreciation of xiv over time compared to the vix is due to the roll yield. Because of the nature of the product, you can get in big trouble if the vix spikes, as it did in 2011. xiv will then get crushed, and since performance is based on a percentage of the current price, it can take a VERY long time to recover. As I’ve suggested before, the solution is to keep a constant dollar value of xiv, buying or selling shares each month to keep the constant value. Obviously, a) you can only pursue this strategy with a relatively small percentage of your portfolio and b) if something like 2011 or (god forbid) 2008, you have to keep your nerve and continue to follow the strategy, trusting that the vix will revert to the mean over the intermediate term.</li>
</ol>
<p>EMM1, I have never been a big fan of annuities because of fees and the holder of the annuity cant get the full return. Otherwise, the issuer cant make money. I am going to look these up though. Thanks. Also, you have issuer risk. Rising rates are probably good for insurance companies though.</p>
<p>Have you run simulations where xiv drops from 25 to 8 and then recovers? Maybe, rum something where xiv drops a point each month for 17 months and then rallies a point for 17 months. I guess you will make money but it can take awhile. </p>
<p>Why not wait until the vix is above historical average valuations before putting the trade on?
Also, where is xiv going to be trading if the vix is trading 35? 3 bucks?</p>
<p>BCEagle91, what did you find interesting?</p>
<p>EMM1, </p>
<p>I like using numbers. Makes things easier for me. </p>
<p>Lets say I invest 200,000 in that ing golden select annuity you mentioned? </p>
<p>What is the value of the annuity in 10 years? 7 percent a year appreciation and the value would be 400,000 in 10 years. Then there are fees. So where am I? </p>
<p>After the 10 years is up I want to start withdrawing. I can withdraw 7 percent a year? That 7 percent draw is based on 200,000, my initial investment? Or the value of the annuity when I withdraw? Or I cant withdraw a fixed amount each year?</p>
<p>Also, going forward after the 10 years, the valuation of my annuity varies depending on what I invest in? Correct? The annuity valuation could decrease?</p>
<p>If I could make 7 percent a year, I would invest in that product. So… There must be a catch? What is the catch?</p>
<br>
<br>
<p>They’re pushing for growth and for central bankers to stop pumping so much money.</p>
<p>I wonder if they are talking their own book.</p>
<p>Ok thanks BCEagle91.</p>
<p>EMM1, I found this…So you are off the hook. :)</p>
<p><a href=“http://www.ing-usa.com/us/marketing/130015/webcollateral/ING-GoldenSelect_ESII_Prospectus.pdf[/url]”>http://www.ing-usa.com/us/marketing/130015/webcollateral/ING-GoldenSelect_ESII_Prospectus.pdf</a></p>
<p>Sorry, I had to step away for awhile.</p>
<ol>
<li><p>In general, I agree with dstark about annuities. TIAA traditional is simply the conservative option in my 403(b) plan at work.</p></li>
<li><p>With respect to Golden Select Annuity, if you invested 200,000 today, you would be guaranteed to have an annuity worth 400,000 in 10 years. You could then either a) use the 400,000 to purchase a standard annuity or b) to have income paid to you over a fixed period. So the question is, how are they making money. I am not an actuary, but I think it is from the investing the fees and (probably) using part of the fees to by some sort of long term options to protect themselves in the event that (as has in fact happened) the underlying emerging market stock funds do not perform very well. In addition, as with all annuities, the amount paid from the 400,000 dollar annuity will be less than the projected amount that you would get if you invested the money yourself.</p></li>
<li><p>With respect to xiv, I took a gamble in making the initial lump sum investment while the vix was at a relatively low point. I should have been more patient. When the vix went to 44 in 2011, xiv lost a little more than 70% of its value. It did even worse during the 2008 crash. But unless the term structure of vix futures goes completely nuts and stays that way, I am still confident that the strategy of keeping a fixed amount invested in xiv will be a long term winner.</p></li>
</ol>
<p>But then again, if I’m so smart, why ain’t I rich?</p>
<p>Obviously, our posts crossed. Have you had a chance to read the prospectus?</p>
<p>“But then again, if I’m so smart, why ain’t I rich.” :)</p>
<p>Well… The prospectus is over 200 pages. :)</p>
<p>I do like the 7 percent a year. I havent gotten to that part of the prospectus. I may not because the fees are out of this world.</p>
<p>Do u want to skim the table of contents and find the 7 percent? :)</p>
<p>I believe you want to look at pp. 24-25</p>
<p>Ok… I see it. </p>
<p>It is a little confusing. </p>
<p>I am going to have to reread it when I get off the elliptical. </p>
<p>There is no death benefit in the rider?
Costs about 0.75 percent a year to get the 7 percent minimum return?</p>
<p>Nat gas and WTI futures opened on schedule at 6 p.m. EST or 3 p.m. dstark time. S&P 500 emini, however still isn’t open.</p>
<p>Looks like s&p futures are trading. No?</p>
<p>S&P is not trading on my screen with IB. It looked like Nat gas and WTI traded, but when I look at booktrader I don’t see any bids and asks at all. Maybe it starts in another hour and I am early.</p>