Don’t Forget To Insure Your Investment

diceHave you ever hated paying your car insurance bill? Did you wind up in a crash that would have cost you several thousand dollars and you only had to pay less than a thousand to get out of the whole mess? If so, then you may realize the benefits of having insurance.

Unfortunately, when people invest in the stock market, they never even stop to think about options that could prevent serious losses. No matter whether you invest directly companies, managed mutual funds, or indexed stocks, failure to use options can easily turn an otherwise successful portfolio into a dismal failure.

What Are The Ways to Insure Your Investments?

Even though options may cost a bit more when making an investment, they are far more valuable than you might realize.

Here are a few options that you should consider when buying stocks:

* Put Options – Used for investing directly in a company. Basically, if the stock value falls below the “put” amount, someone must buy the stock at the higher price. For example, if you bought a stock for $50.00 with a $70.00 put option, someone is obligated to buy the stock at $70.00— even though the value may have gone below $70.00.

* Stop Loss – Your stock will automatically be sold if it drops below a certain value. If you buy a stock for $100.00 and put a stop loss at $80.00, the stock will be sold automatically if it drops to $80.00. Unfortunately, you may not always be guaranteed $80.00; but you will still avoid heavier losses than simply selling off manually.

* Exchange Traded Funds – These funds give you the latitude to trade during the day on index stocks instead of being forced to wait until the end of the day. Needless to say, if you see an index fund tanking because of a terror event or something else, this tool can help you get out of the market as quickly as possible.

* Variable Annuities – These are special investment tools that allow your stocks to be passed on to heirs. They typically are not taxed and offer higher ROI than managed mutual funds. While they may not always make as much as conventional stock investments, they can still offer very high ROI if managed correctly.

* Growth CD – These interest earned by these CDs is determined by large scale indexes instead of those offered by the local bank. As with conventional CDs, they are fully FDIC ensured and tend to be fairly stable investment instruments.

* Index Annuity – Allows you to take part in the stock market without concern for losing your initial investment. Different annuities may require longer or shorter periods of time before you can take your money out.

When choosing this type of investment insurance, you should always know how interest is calculated as well as all the fees involved.

As you can see, there are several ways to protect your stock investments. While they will not always guarantee protection of all your gains, at least you can protect some of your money.

In order to determine what limits you should set when using these tools, always be mindful of the fees involved and their impact on your taxes.

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