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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75379  
Subject: Re: How to make your own annuity on the cheap Date: 1/25/2012 12:46 AM
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How would I do it? I think this is a silly investment strategy, personally, so I would not do it at all. However, if I did want to do this silly strategy, I would use a medium term, BBB to A rated corporate bond portfolio that would yield on the order of 4.5% to 5% now and I would use the coupons to put on a capped bull call spread with maybe a 10% max upside. At current option prices that would give me a participation rate of 100% or slightly more.

Again, that's all fine, but it still underperforms the 12-17% caps the pros offer.

I would structure the option package to last long enough to be able to qualify for LT cap gains if it were in a taxable account, but would prefer to stick it in an IRA.

Again, fine as long as you're only talking small enough balances that you *CAN* get it into qualified accounts.

But like I said, I think this is a silly strategy mostly marketed by the unscrupulous to unsophisticated investors who probably do not have enough risk tolerance to really withstand equity market volatility but who are too greedy or dumb to realize it.

That's not a very nice thing to say about all those people who insist on FRMs for home financing for the exact same reasons ;~)

If you want the last word, you are welcome to it. You are clearly motivated by commissions more than anything else.

Oh really? You're pulling that out of your arse as the best cowardly escape/attack you can think of. If you understood anything about what I've described you'd know the revenues are a fraction of AUM fees for a similar balance, at far more risk.

You *ARE* right about one thing though; This is not the strategy for DIY'ers who like speculation and have a tolerance (financial and emotional) for loss. I've never implied it was.

Its not for salespeople who like padding & racking up commission income either. Selling managed securities accounts, variable products & rebalancing services is far more lucrative to salespeople pitching risk-averse investors.

=============

Hey Ray,

You've previously posted a link for hunting those beauties you love... can you bring it again?

Cheers,
Dave Donhoff
Leverage Planner
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