Volatility

Volatility is a measure of how the price of an asset – be it a stock, an option or a fund - changes. Volatility tracks how much the price moves and also how fast it changes. Beta is a commonly used statistical measure that represents volatility, and the higher beta is, the greater the risk. There’s usually a reference index such as the S&P 500 and if a stock perfectly tracks the index, it is said to have a beta of 1.0. If it changes more than the index, be it on the up or downside, it is a high beta stock. For example, a stock with a beta of 1.5 means that historically, it has moved 150% for every 100% move in the benchmark index. Mutual funds nowadays provide free volatility measures so you can get a good feel for how stable the fund is year in and year out.

Not All Target Date Funds are Created Equal

Conservative is in the eye of the beholder when it comes to target date funds. Very generally, target date funds are mutual fund offerings that automatically shift asset allocations to a more conservative profile as the fund owner approaches retirement age. In other words, a "2015" fund may be purchased by someone intending to retire on or around 2015. This 2015 fund will likely move towards a higher bond and lower equity allocation as 2015 approaches. It turns out that target date funds can be...

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Sequence of Returns Risk

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Life Insurance Companies to Receive $22 Billion in TARP Funds

Life insurance companies that have bank holding company status and applied for TARP funds prior to November 14 2008 will receive $22 billion in TARP funds from the U.S. Treasury. Companies that are set to receive funds include: Hartford Financial Services Group, Prudential Financial, Principal Financial Group, Lincoln National, Allstate and Ameriprise Financial. Many life insurers--particularly those with meaningful variable annuity businesses--have been significantly impacted by the capital...

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Start Thinking of Retirement Account as Part of Your "Longevity Planning"

Forbes magazine publishes a relatively new section called "Forbes Woman" that is dedicated to issues affecting professional and executive women. A recent column discusses financial planning and the need to consider longevity risk when constructing a portfolio--particularly in light of recent capital market volatility. Longevity risk is especially relevant to women since their life expectancies are longer than men. In addition, many women find themselves solely responsible for their family...

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Hartford Financial Hit with Downgrade from Fitch Ratings

Fitch Ratings cut their ratings on Hartford Financial Services Group to two steps above junk status. Analysts are concerned about Hartford's decision to pause or cancel annuity sales in Japan, Germany and the U.K. Hartford has also begun implementing major changes to its U.S. based variable annuity business. Hartford is one of the life and annuity insurers that has been particularly hard hit by the capital market risk and volatility that has been rampant during the financial crisis. Source:...

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Consider Annuities to "Build a Pension and Salvage Your Nest Egg"

An in depth and very worthwhile article in the Wall Street Journal discusses annuities in the context of the financial crisis. Surging demand for annuities--particularly fixed--is a natural reaction to the volatility and pain experienced over the past couple of years. That said, would-be buyers need to inform themselves and consider the pros and cons associated with the entire landscape of options. Topics addressed in the article include: 1) The notion of creating a personal pension 2) Annuity...

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Advanced Life Deferred Annuity

Volatility