Millionaires’ Secrets The Best “Zero-Downside” Investments For 2012 3rd Edition
Published by
The Oxford Club
Millionaires’ Secrets The Best “Zero-Downside” Investments For 2012 3rd Edition
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If you have any questions about your Oxford Club subscription, or, would like to change your email settings, please contact us at 800.992.0205 Monday – Friday between 9:00 AM and 5:00 PM Eastern Time. Or if calling internationally please call 410.223.2643. Copyright – 2012-present The Oxford Club, LLC All Rights Reserved The Oxford Club | 105 West Monument Street | Baltimore, MD 21201 North America: 800.992.0205; Fax: 1 410.223.2650 International: 410.223.2643; Fax: 1 410.223.2650 Email: customerservice@oxfordclubinfo.com The Oxford Club is a financial publisher that does not act as a personal investment advisor for any specific individual. Nor do we advocate the purchase or sale of any security or investment for any specific individual. Club Members should be aware that although our track record is highly rated by an independent analysis, and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future results. All of the recommendations communicated to members during the life of this service may not be reflected here. The stated returns may also include option trades. We will send all our members regular communications with specific, timely strategies and updated recommendations; however, you should not consider any of the communications by our company and employees to you as personalized investment advice. Note that the proprietary recommendations and analysis we present to members is for the exclusive use of our membership. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printedonly publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the worldwide web), in whole or in part, is strictly prohibited without the express written permission of The Oxford Club, LLC. 105 W. Monument Street, Baltimore MD 21201.
TABLE OF CONTENTS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i Put Your Money to Work: Ultra-Safe “Stress-Tested” Investments You Can Start Buying Today . . . . . . . . . . . . . . . .ii “Zero-Downside” Pick #1: Citigroup Safety First Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 “Zero-Downside” Pick #2: Barclays Equity-Linked CDs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 “Zero-Downside” Pick #3: iShares S&P AMT-Free Municipal Series ETFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 “Zero-Downside” Pick #4: EverBank MarketSafe CDs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 “Zero-Downside” Pick #5: Jackson National Variable Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 BONUS #1 “Zero-Downside” Pick #6: Floating-Rate Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 BONUS #2 “Zero-Downside” Pick #7: Rare Stamps and Stanley Gibbons’ Capital Protected Growth Plan . . . . . . . . . . . . . . . 23
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“Zero-Downside” Recommendations: “Stress-Tested” through the 2008-2009 Financial Debacle The Oxford Club issued its first “Zero-Downside” Profit Report in 2008, as the bull market of the 2000s came to a crashing end. You know what followed: Bear Stearns, Lehman Brothers, AIG, GM, Fannie Mae. The very foundation of the American financial system was shaken to its core in a wave of bankruptcies and bailouts. How did our original “Zero-Downside” recommendations fare through the worst financial crisis in 75 years? We’re happy to say… Extremely well. Investors had the potential to get returns anywhere from 52% to 343%! In addition, no one who purchased “Zero-Downside” investments linked to the stock market lost a dime (as long as they followed our recommendation to buy at $10 or less). And remember… this report was issued in 2008… a year during which the Dow was down 34%, the S&P 38% and the Nasdaq more than 40%. Of course, we don’t know exactly when our readers purchased our “Zero-Downside” recommendations… But we’re pleased to say that all of those original recommendations performed as advertised. Many of the recommendations were “structured notes” very similar in nature to the ones we’re going to discuss in this new report. Here’s a sampling of how they performed: • AIG Nikkei 225 Index MITTS (NYSE: NOW) dropped to under $3 during AIG’s travails – yet these MITTS recovered in price at maturity and paid the full $10 guaranteed price back to holders of the units. Potential return… 343% • Merrill Lynch 100% Principal-Protected Global Currency Basket Notes (NYSE: GBO) dropped to under $9 during the crisis before rebounding to more than $13 at one point. The Merrill Lynch notes matured in early 2009. Potential return… 52% • Morgan Stanley Protected Absolute Return Barrier Notes (NYSE: EHN) dropped to nearly $4 during the financial panic, yet rebounded in the aftermath to pay out the entire $10 unit price at maturity in late 2008. Potential return… 144% In all cases, holders of these principal- and capital-protected notes were, at a minimum, paid the full guaranteed cash value of $10 per unit if held to maturity. As long as someone paid $10 or less for these units, they had zero downside to their investment.
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
Introduction Do you think the truly wealthy are risking their fortunes to make their millions? Not a chance… The truth is, they know something most people don’t: The myth that you have to accept more risk for a greater return is exactly that: a myth! There are certain investments that can help you grow your money year after year even in lean times... before or after – even during – market downturns. Unfortunately, fear keeps most investors on the sidelines... even when they know that decision will cost them in retirement. But there are easy ways to position yourself for a big market payout – while keeping your principal completely protected... There are certain types of investments – almost always found in the portfolios of the most successful and wealthy – that offer the best of both worlds: superior rates of return and virtually no risk. They’re what we call “sure things.” i
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
And the strategies these savvy investors use to protect and grow their wealth aren’t just for the ultra-rich. In fact, they’re easily accessible to anyone – but most investors don’t even know they exist!
“ These investments eliminate fear and allow even the most risk-averse investors to enjoy higher returns.” – Alexander Green, Investment Director
In this special report, we give you seven investment opportunities with the potential for outsized returns while keeping your principal fully protected. Each was hand-selected by our panel of experts under the leadership of Investment Director Alexander Green. It’s the ultimate playbook for navigating this treacherous market... and still coming out a winner.
Put Your Money to Work: Ultra-Safe “Stress-Tested” Investments You Can Start Buying Today Investing, by its very nature, is a discipline in which risk is always present. Sometimes the risk is great – and if the price is right – so is the potential payoff. But sometimes the best kind of investment is one in which there’s no downside at all… zero risk… yet has the potential to deliver something extra for the investor fortunate enough to spot the opportunity. That’s what we’re trying to show you in this report: the possibilities available in publicly-traded instruments, such as structured note certificates and floating rate securities, along with products you may be more familiar with, like certificates of deposit and annuities. All offer zero risk of principal loss while giving the recipient a chance to earn a significant return on his or her money. We’ve had to dig deep to find these opportunities for you. In a world in which nearly all information is linked to the internet, a world where millions of investors are looking for an edge... you have to turn over a lot of stones and take the path less traveled... in order to find something that offers opportunity without a significant degree of risk. Chances are, many of the instruments we’ll be talking about below – such as “structured notes” – you’ve likely never heard of. Yet these are legitimate opportunities to earn a decent return on your money. We invite you to explore our research further, either on your own or with your financial adviser. ii
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“Zero-Downside” Pick #1: Citigroup Safety First Certificates History doesn’t lie. Over the very long term, the Dow Jones Industrial Average has been rising gradually – with the exception of a few downward periods – since its first day of trading in 1896. And the bottom line is that, if you are betting long-term on the Dow, you’re likely to win. With Citigroup’s Safety First Series Certificates, you can parlay the Dow’s historical upward track, or any number of other baskets of U.S. and international equity indexes, with an investment that guarantees your principal. Here’s how these certificates work. Citigroup issues securities tied to a variety of indexes and sells them initially for $10 apiece. Between their offering date and maturity date, they trade freely on the stock market. What makes them so appealing is that they can produce gains of up to 125% on your initial investment, depending on how much indexes like the Dow Jones Industrial Average increase between your initial purchase and the maturity date. 1
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
It’s hard to believe, we know. So let’s take one of our favorite, Citigroup certificates (NYSE: ABI), as an example. Citigroup began selling these certificates on April 28, 2009 and they’ll mature on May 8, 2014. At maturity, Citigroup will retire the securities and pay shareholders either A) $10 a share or B) more than $10 a share based on the following formula:
(
Ending value of index – Starting value of index Starting value of index
)
X Participation rate of certificate
The Dow closed at 8,076.29 on April 24, 2009 (which is when the certificate was priced), so that becomes the starting value of the index. And the “participation rate” of this certificate is 125 percent. So, if on May 5, 2014 (when the final payout ratio is determined), the Dow closes at 12,000, the certificate’s payout would be:
(
12,000 – 8,076.29 8,076.29
)
X 1.25 = 60.7%
In other words, the payout would be $10 + $6.07, or $16.07 per certificate. In simpler terms, if the Dow moves 10% by May 8, 2014, you’ll get 12.5%. If it moves 20%, you’ll get 25%. Citigroup Safety First Certificates are one of those rare investments with a high ceiling for profit and no strings attached to them. But what makes them even more rare is the extremely low risk – or potentially no risk – they carry. With these certificates, you are guaranteed a minimum payout of $10 per share no matter which direction the Dow goes. So if you can purchase these certificates for less than $10… you’ve eliminated the possibility of suffering a loss. If the Dow Jones nosedives and the securities close at $5 (which is enormously unlikely), you’ll get back $10. If the securities close at $1 (even more unlikely), you’ll still get back $10. 2
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
There’s only one way you wouldn’t get your original $10 back – That’s if Citigroup itself goes under. And if recent financial history has taught us one thing, it’s that our government will do anything to keep our nation’s largest financial institutions afloat. There is an additional caveat. While you’re guaranteed to receive back $10 for each certificate, any price you pay over that amount is subject to loss. As an example, let’s presume you pay $13 to own the certificate (the extra $3 in value reflects the run-up in the DJIA’s price since the certificate was issued). Let’s further presume that later on, closer to the certificate’s maturity date, the DJIA suffers a large decline. Let’s further suppose that, after the DJIA’s decline, the quoted price of the certificate is now exactly $10. You will still lose $3 of your original $13 purchase. What this means to you is... you should be looking at certificates or, indeed, any structured note products (There’s a list of the Citigroup Safety First Certificates below, but there are dozens of others available from Bank of America and other large investment banks) that trade, ideally, at or below their guaranteed unit value (typically $10 or $25). And understand that, if you’re paying more than that amount, whatever you pay over that price is at risk and dependent on the value of the underlying equity index it’s based on. Long story short about these Citigroup certificates: You are guaranteed a minimum payout of $10 per share plus whatever gains the certificates rack up on the open market before their maturity date. You have more than 100 certificates to choose from at www.citifirst.com. These certificates are tied to a variety of indexes and different maturity dates. Take a look at the next page for an example. Action to Take: Buy Citigroup Safety First Principal-Protected Trust Certificates at or below $10 a share. No trailing stop is necessary. Hold to maturity to ensure a positive return and zero downside on your invested principal. (You can look up the quotes on the certificates on the NYSE website. Simply enter the symbol.) 3
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
Symbol
Name
Security
Maturity
Participation
ATA
Safety First Trust 2008-1
US-Europe- Japan Basket
03/06/14
100%
AMM
Safety First Trust 2008-2
S&P 500 Index
7/11/2013
100%
S&P 500, BRIC 40, DJ EuroStoxx
9/12/2013
85%
AHB Safety First Trust 2008-3 AHY
Safety First Trust 2008-4
S&P 500
10/10/2013
90%
AKN
Safety First Trust 2007-4
US-Europe- Japan Basket
5/23/2013
100%
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“Zero-Downside” Pick #2: Barclays Equity-Linked CDs Barclays also offers a line of certificates that give you unprecedented downside protection and more specialization to your investing preferences. But what’s most stunning is the unprecedented payout potential for a CD. These are equity-linked CDs that track specific indexes. If the index gains in the time between your purchase and the certificate’s expiration, it’s icing to your original investment. You’ll also receive an annual 2.5% interest payment on top of that. Here’s how these CDs work. For example, let’s say your initial investment is $1,000. Upon the CD’s maturity date, you’ll receive a payment based on the quarterly performance of the index or basket of securities during the term of the CD. That payout to you will be either the principal amount of your CD ($1,000) or the principal amount multiplied by the sum of 20 quarterly returns over the course of five years. You’ll also receive “coupon” payments – which are basically interest payments with a different name – of 0.5% per year, equal to 2.5% for the length 5
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
of the CD. And you’ll get this regardless of the index or basket’s performance. Another perk about these CDs is the different kinds available to choose from. If you want to follow the S&P 500, there’s a CD for that. If you prefer to track the performance of global stocks or indexes, there’s a CD for that. If you’d rather track the gains of hard and soft commodities, there’s a CD for that. But what if the index the CD is tracking performs negatively? What if the tracked commodities plummet in price? The short answer to both: You won’t lose a penny. You’re downside protection is guaranteed. If the index or basket it is tracking performs negatively, you’ll get every cent of your initial investment back. And of course, any gain made by the index is frosting on the cake. Put simply, it is guaranteed cash in your pocket… no matter what. Like the Citigroup Safety First Shares, these CDs are subject to the credit worthiness of Barclays. But in the very unlikely event the bank defaults on its obligations, you’ll still receive your CD’s principal of $1,000 back, thanks to FDIC insurance. Barclays has a rotating menu of these CDs that changes every month. However, these CDs aren’t traded on a public exchange. Talk to a broker or advisor to know what’s available and how to get them. Action to Take: Buy Barclays equity-linked CDs.
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“Zero-Downside” Pick #3: iShares S&P AMT-Free Municipal Series ETFs Municipal bonds’ reputation for safety amidst chaos has been fundamental to America’s growth. Since the 1800s, in rural counties and industrialized cities, municipal bonds have been the financial backbone of public works projects large and small – from bridges, to buildings, to parks and schools. And as such, “munis” can be either building blocks or pillars of zero-downside support to your portfolio – even during economic uncertainty. But what we’re talking about is a different, easier and safer way to invest in munis. Not only in the method of investment but in the benefits that are unseen by traditional municipal bond investors. The iShares S&P AMT-Free Municipal Series ETFs go one step further and protect your principal by offering funds with specific maturity dates that invest in AMT-Free, investment grade, non-callable national municipal bond debt. Here’s how it works… 7
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
First, it’s an ETF. So right away, you know investing in these munis is as easy as buying and selling any stock. Then, in the final months of these ETFs’ operation – as the bonds they hold mature – their portfolios will transition to cash and cash-like instruments. Following the funds’ termination date, the funds will distribute substantially all of their net assets to investors and close down. The funds seek results that parallel the performance of the S&P AMT-Free Municipal Series Index, which is comprised of bonds that fund the development of public works projects across the country. (We’ll get into the “AMT-free” part in a little bit). Unlike the Barclays CDs, this fund doesn’t require a minimum investment. Rather it’s an ETF that can be bought and sold at any time on the open market, just like any stock. But unlike other ETFs or stocks, your holdings transition into cash, which is distributed back to you upon termination of the fund. Plus, the iShares S&P AMT-Free Municipal Series offers maturity dates that run until 2017. So you can pick whatever maturity date you are comfortable with. And though your investments aren’t guaranteed by a behemoth international financial institution, they are extremely safe. The fund’s holdings are a diversified collection of municipal bonds. And muni bonds with an investment-grade rating from Moody’s have a historical default rate of 0.07%. That kind of downside protection is unheard of when it comes to ETFs, let alone publicly-traded investments. The final benefit of the iShares S&P AMT-Free Municipal Series ETFs? AMT is short for Alternative Minimum Tax. The funds only invest in bonds that are considered tax-free under IRS AMT. If you are unfamiliar with the Alternative Minimum Tax, it’s an additional tax some people have to pay on top of their regular income tax if their income is over a certain amount. That “amount” isn’t a fixed figure, so that’s where things get cloudy. But one thing is for certain: This tax was passed to prevent people with high incomes from using special tax benefits to reduce the amount of taxes they pay. These iShares ETFs offer a loophole investment to help avoid being socked with an additional tax burden. If your income is above $150,000 and you are 8
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
subject to the Alternative Minimum Tax, these funds won’t add to your tax liability. And here all along you thought that getting richer meant paying more taxes! Action to Take: Buy iShares S&P AMT-Free Municipal Series ETFs. Hold to maturity to ensure a positive return and zero downside on your invested principal. Here’s a current listing of the available iShares S&P AMT-Free Municipal Series ETFs:
iShares 2012 S&P AMT-Free Municipal Series ETF (NYSE: MUAA)
iShares 2013 S&P AMT-Free Municipal Series ETF (NYSE: MUAB)
iShares 2014 S&P AMT-Free Municipal Series ETF (NYSE: MUAC)
iShares 2015 S&P AMT-Free Municipal Series ETF (NYSE: MUAD)
iShares 2016 S&P AMT-Free Municipal Series ETF (NYSE: MUAE)
iShares 2017 S&P AMT-Free Municipal Series ETF (NYSE: MUAF)
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“Zero-Downside” Pick #4: EverBank MarketSafe CDs Gold and silver were valuable long before there were stock markets and official currencies. And ironically, it could be argued that the advent of stock markets and currencies made gold and silver more valuable. That’s because when stock markets tank and currencies crumble, investors flock to gold and silver time and time again like it’s a primal instinct. The metals’ track records for safety during economic turbulence speak for themselves. Not surprisingly, the annual gains on precious metals most certainly beat the S&P 500 during the 2008-2009 financial crisis. But even now, a number of factors argue for further gains in gold and silver: • Governments around the world, are enacting stimulus measures which have a tendency to devalue paper currencies and raise fears about inflation. • Rising global demand for precious metals: Economic growth is creating a middle class in China and India, where ownership of physical gold is a cultural tradition, not to mention an interest in buying other products or services where gold is a key component, such as jewelry, art, cellphones or even dental services. 11
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
• A plethora of economic Nostradamuses say the real global economic crash hasn’t even happened yet. It doesn’t matter if that’s true or not. Some people believe it and are stocking up on precious metals. • New deposits of high-grade gold ore are getting harder and harder to find. And we all know what a lack of new supply in the face of rising demand can do to commodity prices.
Full Metal Jacket If there’s one thing confusing to investors, it’s the overload of choices regarding precious metals. Gold or silver? And what form: coins, bars ETFs or mining stocks? In short, it’s hard for most investor’s to judge the potential volatility and risk involved. That’s where EverBank steps in… and eliminates the downside volatility and all the risk with its MarketSafe CDs Everbank’s MarketSafe CDs offer you an opportunity to participate in specific markets and realize potential market-driven returns at maturity with the confidence that your deposited principal is 100% protected. EverBank’s precious metals-linked MarketSafe CDs allow investors an easy way to tap the profit potential of gold, silver or a basket of diversified metals while simultaneously eliminating market risk. What separates these instruments from the rest of the pack are EverBank’s unequaled benefits. With your MarketSafe CD, you get these unique characteristics: • 100% principal protection • FDIC insurance • Zero account fees • A higher earning potential than traditional CDs • A low minimum balance of $1,500 • Flexible lengths of maturity – ranging from 13 weeks to 5 years These CDs combine the financial security offered by traditional CDs with the potential for market-driven returns. And it does so all while guaranteeing that your hard-earned deposited principal is 100% protected. In fact, you can even choose from other CDs linked to stock-market indexes: 12
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
the S&P 500, the BRIC countries, Japanese REITS, you name it. With all options, it works the same: MarketSafe CDs deliver returns based on the average price or point-to-point performance of selected indexes. EverBank also gives you the option to open a MarketSafe CD as an IRA to gain exposure to a market while shielding your returns from current taxes. EverBank’s CDs keep safe investing from being boring and ultra-conservative. They allow you to indulge in your sometimes guilty but risky pleasures such as currencies or emerging markets without taking on excessive risk... If those indexes go down, you still have your principal. You don’t lose. That’s why it’s no coincidence that investors are seeking them out more than ever. We think you should too. *EverBank’s MarketSafe CDs are proving immensely popular. In fact, demand was so great in 2011 that EverBank sold its entire allotment in just eight months! Stay tuned in 2012; EverBank tells us they will have more MarketSafe CDs available soon.
Action to Take: Call EverBank Concierge at 866.343.0560 or email them at: getanswers@everbank.com and tell them you are interested in finding out more about their MarketSafe CDs. You can also go directly to their website to learn more about these offerings: https://www.everbank.com/personal/marketsafe-cd.aspx. EverBank: A Pillar One Advisor Get even better deals from EverBank…through The Oxford Club’s Pillar One Advisor program, available exclusively to members. Pillar One Advisors like EverBank give you entrée to a universe of special services, always with the goal of helping you build and protect your wealth. Members can also avail themselves to special discounts and offers. Among our Pillar One Advisors, you’ll find trusted firms that have been servicing Club members for years, which can help you build your portfolio of fine art, precious metals, plus silver and gold coins. You’ll also find specialists who can provide travel services, portfolio management, answer your questions about commodities and mining stocks, or help you navigate the large array of choices for annuities and insurance. Make sure to mention the Pillar One referral code #12374 when you call EverBank to order your MarketSafe CD: 866.343.0560 or email them at: getanswers@everbank.com. Full disclosure: We have an ongoing business relationship with EverBank because the folks there have a viewpoint on the economy and markets that lines up with our own… and because they offer some of the most unique savings vehicles out there. Likewise, we’re likely to be compensated if you open an account with them.
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“Zero-Downside” Pick #5: Jackson National Variable Annuity How great would it be knowing you had a handsome income stream for your retirement that would last the rest of your life? Instead of worrying about where those funds will come from, you could instead be conjuring up images of the fun you’ll be having. Annuities are the typical investment vehicle called upon to deliver such peace of mind. An annuity is a contract between an investor and an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. But in our estimation, previous annuities never offered enough benefits to offset their high cost, making them unsound investment tools. But times have changed... There are increasing benefits being added to annuities and costs are decreasing. Today, we feel annuities are viable investments worthy of a spot in your portfolio. That’s why we’re recommending one now… 15
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
It wasn’t long ago – 10 years or so – that annuities were fee-laden, high-profit products for the issuing companies. So it was no coincidence that both their sales volume and public sentiment were very low. But the big change came when Baby Boomers sought and demanded better retirement-planning instruments. The lifetime income stream and death benefits offered by annuities fit the bill. Realizing this, financial institutions and insurance companies alike had their collective moment of clarity – they decided to build true merit into a new generation of annuities and make a fortune meeting the investment needs of this untapped, massive pool of clients. The following years saw the landscape of products change dramatically. Costs came down and benefits went up. Issuing companies now had a lower profit margin product to offer, but sales volume skyrocketed. The result: The investing public has substantially better products to choose from.
Ensuring a Stress-Free Retirement We’ve found that investors are a pretty fair group. They don’t mind if someone else makes a little money, provided they see a true value for what they’re paying. And this is the right context from which to view annuities since they do carry higher costs than mutual funds or other separately managed accounts. But they also offer benefits and income the others cannot. Understand that if your number one concern is the return of a future lump sum, you may want to look elsewhere. Annuities are designed to guarantee the generation of lifetime income and they are less efficient as future lump sum instruments. One thing holds true regardless of what your retirement dreams are: In order to realize your dreams, you’ll need an income stream that will outlive you. Obviously, adequate savings for retirement is critical, too. But savings is only one side of the coin. It’s equally critical that you position your assets to provide sufficient income before and during retirement. Remember, inflation doesn’t stop the day you retire. And for many people, 16
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
the time spent in retirement will be nearly as long as the time spent in the work force, if not longer. Careful retirement planning can alleviate the otherwise real prospect of running out of money before you run out of time. With corporate benefits dwindling and life expectancies lengthening, investors have to prepare to meet new challenges in new ways. And annuities are now able to help investors to not only meet these challenges but overcome them. Annuities are excellent complimentary tools for any investor looking to invest for maximum growth while still guaranteeing either a current or future income stream. These can be folks on either side of retirement, but we don’t see much value for folks not yet 50 years old. Modern variable annuities are highly customizable. Depending on how long any individual investor might want to defer their income stream, or whether they want to guarantee income for just their life or also the life of a spouse, one annuity provider’s offering may be more suitable than another. So we recommend you speak with only a qualified, impartial professional who can help you find the right fit for your specific situation. But let us give you one general example we think is particularly flexible and attractive: Our “zero-downside” investment of choice is a variable annuity from Jackson National that includes a rider called LifeGuard Freedom Flex. Here’s how it works… Your investment tracks two values, the Contract Value and the Benefit Base. The Contract Value is determined by your investment performance, and the Benefit Base grows through both annual bonuses and periodic investment gain lock-ins. You can customize your LifeGuard Freedom Flex rider to pay an annual bonus ranging from 5% to 8% and to lock in your investment gains for future benefit calculations, either quarterly or annually. Simply put, if your contract value doesn’t grow in any given year, your benefit base will grow by the amount of the bonus you’ve selected. And if the markets rally, all your gains – which are not capped in any way – are locked in on whatever schedule you choose. Said another way, no matter what the markets do each year, your future benefit base grows; it’s just a matter of how much. That’s what we like to see in a 17
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“zero-downside” investment. Another benefit to these annuities – especially in regards to your retirement and estate planning – is that you can customize your payouts. You can choose to have your income stream cover multiple lives, and you can even choose enhanced death benefits if that helps you reach your planning goals. Again, these additional options should be considered with the help of a professional. You don’t want to pay extra for an optional rider that really doesn’t help you, and you also don’t want to overlook one that does. A trained eye can help. We also like Jackson National’s annuity for another critical reason – the investment choices. We tend to think of annuities for their insurance element, and we sometimes forget that they are also investments just like any other. As such, you want as robust an investment opportunity as you can get. Jackson National is one of just a handful of providers that will let you, the investor, maintain complete investment control with unlimited upside potential. Most others set a pre-selected allocation model or otherwise put controls on your allocations. These serve only to reduce the future growth potential of both your contract value and your benefit base. Jackson National’s investment lineup boasts over 100 options and offers direct exposure to all parts of the globe. They have subaccounts that span well beyond the obvious market cap boxes and will focus on commodities, private equity, interest rate hedges and much more. Action to Take: Call our longtime Pillar One Partner Jeff Winn at 800.432.4402 or email jwinn@iaac.com to learn about how a variable annuity might help you reach your goals.
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
BONUS #1 “Zero-Downside” Pick #6: Floating-Rate Securities One of the biggest threats to anyone in retirement is when there’s a sustained rise in interest rates. Sure, your cash accounts will earn more. That’s a good thing. But most bonds (save for TIPS) or other interest-bearing securities purchased before rates begin rising become less valuable. But there is a type of bond-like instrument that will work in your favor when interest rates are going up. It’s called a “floating-rate security” or, as it’s often known among income-investing pros, a “floater.” Imagine someone taking a bond issue and chopping it up into $25 slices that you could buy, just like a stock: That’s what this floating-rate security offers. Typically, the description of a floating-rate security might be something like the following: “The floating rate distributions will be paid at a rate equal to the greater of the three-month U.S. Dollar LIBOR plus 0.70%.” Let’s dissect that statement. 19
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
What’s the USD LIBOR? USD stands for “U.S. Dollar.” And LIBOR stands for “London Interbank Offer Rate.” LIBOR is basically the global reference point for the rate at which banks lend each other money around the globe. If you search on the internet, you’ll find the rate for the 3 month USD LIBOR. For example’s sake, let’s say the 3 month USD LIBOR is 0.25%. Now, let’s do some math on the floating rate security mentioned above:
The 3-month (or quarterly) USD LIBOR: 0.25% + 0.70% X 4 quarters = 3.8% So now we know that for one three-month period (or quarter), our floatingrate security will pay nearly 1% interest (0.95%). And over the course of a year (or four quarters), our floater will pay 3.8%. Now remember that LIBOR fluctuates. A year from now, in an environment of rising global interest rates, the LIBOR might be quoted at 0.45%. So what would our floater pay us then?
The 3-month (or quarterly) USD LIBOR: 0.45% + 0.70% X 4 quarters = 4.6% So now our same floater will pay us 21% more! When interest-rates are soaring, you don’t have to sweat it. Your floating-rate security is paying you just that much more. And here’s where floating-rate securities become really interesting. Let’s suppose you thought interest rates were going to soar – and you’re wrong... There are even floaters that can protect you when rates are headed lower. You see, some floaters have minimum, or “floor,” rates, so that even if interest levels continue to decline, the issuer will still have to pay you a certain minimum level of income. The description of these floating-rate securities might typically say: 20
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
“The floating rate will be equal to the three-month U.S. dollar LIBOR but will not be less than 3.00% per annum.” There are a few caveats that you want to keep in mind. The risks associated with buying a floating-rate security are similar to buying any other bond: namely bankruptcy of the issuer. Make sure that the company has a B rating or better from Standard & Poor’s or Moody’s. The other risk has to do with the price you pay to own the floater... Remember that floating rate securities typically have a liquidation value of $25, plus dividends received. Sometimes a popular floating-rate security will have a quoted price of more than $25, depending on the ratio of dividends it might be paying. But when the security is eventually “called in” by the issuing institution, it will only be worth its $25 unit value – and whatever you’ve already collected in interest distributions. So ideally, you want to pay less than $25 to own one of these floating rate securities. Here’s a list of some floating-rate securities, although there are many more available: Symbol
Security
AEB
Aegon NV Floating Rate Perpetual Capital Securities
MS-A
Morgan Stanley Floating Rate Depositary Shares Preferreds
BML-H
Bank of America Floating Rate Depositary Shares Preferreds
PYT
ML Depositor PPLUS Trust Floating Rate Certificates
Action to Take: Buy floating-rate securities for “zero-downside” protection from rising interest rates.
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Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
BONUS #2 “Zero-Downside” Pick #7: Rare Stamps and Stanley Gibbons’ Capital Protected Growth Plan If you’re looking for a zero-downside opportunity, why not consider an “alternative” alternative investment? In this case, we’re not talking about gold or silver (which certainly DO have downside risk). No... We’re talking about an entirely different type of asset: rare stamps. And we’re talking about a particular investment product called the Capital Protected Growth Plan, offered only by Stanley Gibbons, the world-famous UK-based stamp company. Here’s how it works: You, the client, sign a contract term for five or ten years, during which your money is invested in an individual portfolio of rare stamps. How much money do you need to benefit from this zero-downside opportunity? At least 10,000 pounds. At today’s currency rates, that’s equal to about $16,000. But you can invest even more if you choose... Invest 50,000 pounds ($80,000) and you get a 5 percent discount upfront. Invest 100,000 23
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
pounds (roughly $160,000) and you’ll get a portfolio of much rarer stamps and a 10 percent discount. When your contract term ends, Stanley Gibbons will sell your portfolio of rare stamps at its full market value. You’ll receive 70 percent of the profits and Stanley Gibbons collects 30 percent as its commission. Here’s the zero downside part of their plan: Stanley Gibbons guarantees that your original investment will be returned in full, no matter what happens to the underlying value of the rare stamps in your portfolio. How can they do that? First, you’re investing in an asset that, by its very nature, is scarce and not subject to replication. That puts the fundamentals of supply and demand on your side. There are only so many 1840 “Penny Blacks” in existence. An unused stamp of this kind, with its original “gum” on the back, sold for 3,750 pounds ($6,000) in 2003. By 2010, it was worth 10,000 pounds ($16,000). Also, you’re not going to a stamp show yourself, buying blindly without the knowledge of which stamps are truly rare and sought-after by the global community of collectors. Your stamp portfolio is built by a firm that has been appraising and cataloging stamps since 1856. Stanley Gibbons today is a debt-free public company and Philatelist to the Queen. And because of their 100% capital security guaranty, their interests are aligned with your interests (namely, a return of your principal and making sure your portfolio has the stamps with the best probabilities for generating a profit). Also, because of your five-year contract, you’re holding this particular investment for a reasonably long period of time. In an age when “long-term investing” in stocks could mean selling next week or next month, the contract with Stanley Gibbons is a truly long-term investment. And given the scarce nature of rare stamps, the multi-year horizon literally gives plenty of time for good things to happen to your portfolio. And perhaps most importantly, as an asset class, rare stamps have outperformed every other kind of traditional and non-traditional investment. Over the past five years, a collection of Great Britain-issued rare stamps (called the GB30 Rare Stamps Index) rose 84 percent – despite the 2008 financial crisis! Since the GB30 Index was created in 1998, it’s risen 274%. When you break down the numbers, it amounts to a perfectly reasonable long-term annual return of 12.8%. Let’s suppose I invest my money and, a few years later, I have an emergency 24
Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012
need for the cash? Can I get my money back early? After completing the first year of your five- or ten-year contract, you may exercise an early termination option. Afterwards, Stanley Gibbons will market your portfolio of rare stamps for 12 months through its catalog and online marketplace. Upon completion of the sale, the company will pay you a sum equal to the original purchase price, plus half of any profits. If any stamps are unsold, they’ll remain as part of your portfolio in your original Capital Protected Growth Plan contract. Again, after the contract ends, Stanley Gibbons will still guaranty your original investment value on those stamps. Action to Take: Call Geoff Anandappa, Investment Portfolio Manager at Stanley Gibbons Ltd to discuss the firm’s Capital Protected Growth Plan. You can reach Geoff in London at: 011.44.207.557.4442 or via email at ganandappa@stanleygibbons.com.
Oxford Club members from Canada: Because of differences in national laws and tax regulations, we would encourage you to contact the Club’s Pillar One advisor in Canada, Brent Amey at TD Waterhouse PIA to discuss any of the equity-traded recommendations in this report. You can reach Brent’s office in Barrie, Ontario at 800.669.7896 or 705.726.1310 or email Brent at Brent.Amey@td.com. The ideas presented in this book are simple, yet foreign to the large majority of investors. That said, we invite you or your financial advisor to research these investments as we have. It’s our bet that you’ll arrive at the same conclusion as the super wealthy of the world. These under-the-radar opportunities are legitimate ways to earn a sizable return without the anxiety and wariness attached to mainstream high-risk investments. They will protect your principal… They will cultivate your wealth… They will change the way you invest. 25
Millionaires’ Secrets The Best “Zero-Downside” Investments For 2012
Lean how you can profit in any market with your principal fully protected. In a perfect world, the markets move in one direction... up! Unfortunately, that’s not our world. No matter how hard the so-called “gurus” may try to convince you otherwise, the reality is no one can predict where the market is headed. Accepting that truth is the first step toward building a marketbeating portfolio that can weather all seasons. Under the guidance of Investment Director Alexander Green, The Oxford Club Panel of Experts has selected seven specific investments that offer tremendous upside advantage while protecting your stake from market downturns. These seven, hand-selected picks are only available in Millionaires’ Secrets: The Best “Zero-Downside” Investments For 2012. This special report gives you all the details on these investments and their valuable features, including diversity, choices, unparalleled safety and the chance to enjoy market-linked returns. Inside, you’ll learn how to safely profit from... • • • • • •
Equity-linked securities that track specific indexes Gold, silver and the precious metals markets A fund that holds only top-rated municipal bonds Certificates that offer Dow-based returns An annuity that pays out however you choose A “floating” income investment that protects against rising interest rates • The appreciation of a unique selection of collectibles
300B005112
The best part of all is that each offers 100% principal protection. These investments are your best choice for catching the bull market while protecting against the bears!
The Oxford Club
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