Let me start out with a story about 401(k)s and investing.
There was a company with employees who wanted to invest their 401(k)s back into the company again.
It seemed reasonable; the employees were obviously familiar with the company, how it produced and operated, and they were motivated to see it succeed.
In fact, this company's employees had 62% of its retirement accounts invested back into the company.
Then disaster hit, massive layoffs occurred, and the company declared bankruptcy, further destroying any value the stocks had.
Employees found themselves without a job or a retirement fund in a matter of weeks.
Enron is a scary example of why you should never invest a huge portion of your 401(k) in one company, much less the one you work for.
What would you do if this happened to you? I'm sure you're thinking that most people learned from Enron.
According to Forbes, these companies are following the same blueprint for disaster that Enron did by reinvesting 40% or more back into their company: * McDonalds * Caterpillar * General Electric These companies do seem solid.
Of course, so did BP 6 months ago, and almost a third of their employees reinvested their retirement back into their company.
There has to be a smarter way to grow your retirement! Many financial experts are talking about the need for diversification.
They will pontificate the importance of getting into different types of stocks for diversification, such as tech stocks or the like.
This philosophy makes about as much sense as betting on one type of crop to flourish during a drought over the other; if a drought hits all the crops are going to be financially worthless.
Same with the stock market.
If the stock market tanks (as many project it to over the next year) then the entire market will tank regardless of which type of stock you have.
Preaching diversification is popular right now, but it's popularity is such for only one reason: people are equating diversification with safety.
Diversification is not the most important thing in investing right now.
What Americans want and need more than anything else is safety.
They want to know that they can put their investments somewhere and their money will grow.
This rationale is why annuities have become so popular lately.
There is a false belief that giving gobs of hard-earned money to Life Insurance Companies so they can pay you small returns 20 years from now is a key to wealth.
However, many people don't understand just how bad of a rip off these annuities are.
The reasons are numerous, ranging from lack of return to inflexibility to hidden fees & charges dragging your return down like an anchor.
Some people are defensive of annuities, claiming that the companies don't get rich off of hidden fees.
Next time you go downtown, look for a Life Insurance Building.
Stand in front of it and look up.
Chances are it's one of the highest buildings in town.
These skyscrapers don't get built because they're making YOU money; they get built because their making the company money.
In conclusion, it is not wise to gamble with your savings or retirement by betting on the performance of your company, much less the stock market.
Americans want to put their money in a place where it is guaranteed to earn a fixed interest and backed with collateral rather than derivatives.
In this economy, the stock market and life insurance cash value products are not providing this option.