Real estate investment trusts (REITs) were once considered a safe place to park your cash and watch it flourish. Indeed, real estate seemed like a logical, attractive investment. Everywhere you looked, more and more shopping centers, hospitals, offices, theaters, and storage facilities were going up faster than a child?s Erector set. At their height, REITs were able to offer a none-too-shabby 7% to 8% yield.
But then, as we all know, the real estate market crashed in 2008, and the trend has seen a sharp reversal. The average yield in September was around 4.3%, far below where it had once been.
With investors now seeking a more reliable investment vehicle with less risk and better returns, the time is ripe for you to discuss fixed index annuities with your clients.
According to recent analysis, eight of the largest real estate investor companies (REICs) have lost 37% of their value over the last seven years, for a total of $11.3 billion. Some of the groups that have seen their once-profitable shares plummet include CNL Lifestyle Properties and the Dividend Capital Total Realty Trust Inc. The former?s shares have dropped from $10 to $7.31 whereas the latter?s have dropped from the same amount to $6.69.
The most obvious reason for this across-the-board depreciation might simply be the high unemployment rate, which peaked at 10%?in October 2009. As long as people remain jobless, they are naturally far less likely to buy new homes or refinance their current mortgages.
Although recent news suggests that the unemployment rate is steadily improving, why take the chance of investing in a mutual fund that doesn?t guarantee a minimum rate of return when the real estate market is still spinning its wheels? Your clients deserve to reap the benefits of a secure, no-risk investment product.
Fixed index annuities offer advantages that make them much more attractive than REITs, not the least of which is their safety. Contract owners of FIAs can expect to receive a steady retirement income and need not worry about losing their principal even when the market is performing miserably. To combat inflation, riders are also available that can raise the annuity?s payout by 3% to 5% annually, though such riders come with a hefty price.
During the growth phase, FIAs provide other desirable features that set them apart from REITs. Since accumulated value is tax-deferred, the interest is able to compound more quickly in a shorter period of time. And despite what the naysayers claim, contract owners enjoy plenty of liquidity: up to 10% can be withdrawn annually without incurring a penalty.
In short, fixed index annuities afford participants the benefit of being linked to the market but without any of the risk. For clients who have lately been dissatisfied with their REIT?s lousy rates, FIAs just might be the cure.
Call Sumrall today at 1-800-274-2844 to help your clients find the right FIA to preserve their wealth.
Source: http://mysumrall.com/reits-a-risky-investment-in-a-slow-real-estate-market
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