The reputations of some financial products, like words, can change | Retire on Track
The English language is constantly evolving. Words and phrases come into being with specific meanings, but they morph over the course of decades to mean something different. Take the word “decimate,” for example. We often use it to mean ruined or destroyed.
But the origin of “decimate” is different. According to Garner’s Modern English Usage, the word originally meant “to kill one in every 10.” But over the centuries the meaning changed “to cause great loss of life; to destroy a large part of.” And we’re still finding new ways to use the word that stray even further from the word’s original and transformed meanings, author Bryan Garner says.
The discussion got us thinking about how the reputation of certain investments and financial products have changed in the public over the years. Two that came to mind right away are reverse mortgages, banks and the proper recording of off-balance sheet assets, and, of course, annuities.
For many years both products have had negative reputations. But in recent years a more nuanced and balanced view of them emerged. Academic research has validated their benefits, and over the past few years we’ve had more interest from clients about them. Annuities were a pretty common topic last year as clients became concerned about instability in the markets and economy.
For the record, I don’t view investments and financial products as “good” or “bad.” Instead, I look at them for their potential to meet a client’s goals, rationally weighing their costs against the potential benefits. For some clients, annuities and reverse mortgages might be suitable, and for others, they aren’t.
High-yield bonds, issued by companies and rated below investment grade by credit agencies, are another example. You might call them junk bonds, a common term that didn’t do their reputation any favors. And they’ve certainly had a checkered history of defaulting during difficult economic times. But they can be appropriate investments as part of a diversified portfolio.
Words and terms change in meaning and acceptable use over the years. But the fundamental characteristics of investment products don’t, although their reputations grow and decline in certain markets. At times even the value of stock ownership and real estate has been questioned. Look at investment options rationally.
Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at heraldtribune.com/business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, insurance services offered through an Avantax-affiliated insurance agency. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.
This article originally appeared on Sarasota Herald-Tribune: EVAN GUIDO: Study investment options rationally and ignore reputations.
