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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76078  
Subject: Re: Strategy comparison S&P500 vs. IUL [rev 1] Date: 4/4/2013 5:09 PM
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Properly structured, with existing reserves and future interest savings linked to the same interest rate markets as the ARM mortgage, the ARM is actually safer than a FRM. This requires no active trading, and has zero risks of "drawdown."

But it does have the risk of a significantly rising payment, i.e. 'payment shock'. And as we went through before http://boards.fool.com/frm-vs-arm-debate-29488726.aspx?sort=... 'proper structuring' requires either a signifcant amount of current reserves, or a significant investment each month in excess of the FRM payment. And if someone were to 'invest' the same amount (either current reserves or additional payment over the FRM payment), they could achieve roughly the same results, without having the risk of having a significant payment shock.

AJ
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