Sell In May Twist Annuity Strategy, Really Just April Fools

What if I told you I had a no-risk, common sense method that would earn you an average of 12% annually, would you be interested?

Of course you would, heck, now I’m interested.

Doubling your money every six years can be in your future, if….you just buy an Equity Indexed Annuity from a certain insurance agent.

The insurance agent website ProducersWeb (PW) allows insurance agents to create a public blog within the PW site, giving agents more exposure.  PW evidently could care less about the content.  Somehow I ended up on the site and came across an article with the following tag line:

Through focusing on indexed products during the fall and winter months, the client’s money doubles every six years. Be a master of your client’s destiny by following this age-old market-timing strategy that does work.

Essentially the strategy is to use “seasonality” to be in the markets during the best periods, in this case, being out during the summer months (the old, Sell in May adage).

The blogger explains why the “seasonality” approach works:

Selling in May and going away has been described by some pundits as a market-timing strategy but can really be explained by the simple law of supply and demand. Savers, investors and institutions typically put more money into the winter months and take it out during the summer months due to the IRA, 401(k) matchs, tax season, pension contributions and portfolio window dressing.

So there you have it, a simple explanation for why the markets always go down during the summer months and why you can take advantage of it, it’s common sense!  Using the above strategy one need only to follow this sage advice:

“…after choosing the hot months to contract on a FIUL or FIA product, the client can always rebalance and allocate money to a fixed account during the cold, dark days of winter and spring swoon.”

Evidently the key to huge, risk free returns has been found, one only needs a greater fool to be a counterparty – the insurance company offering the Equity Indexed Annuity.

This is all just foolishness, in my opinion.

Whether or not “sell in May” actually works is highly debated and is by no means a common sense, sure bet.  Michael at the Market Science blog recently posted a debunking of the Sell in May concept.

But debunking seasonality is less the issue, the real issue is that if the data really showed such an affect was possible, the insurance companies would adjust their models to ensure that it couldn’t be taken advantage of.  Insurance company actuaries as a whole are not idiots, they have a lot of data at their fingertips and price their products accordingly.  They don’t always get it right, but I can assure you, if they were paying 12% annually on their equity indexed annuity products, the actuaries would be fired.

With no evidence an agent can make a claim on a well followed website of no-risk 12% annual returns and no one says anything.  The following claim was made:

Through focusing on indexed products during the fall and winter months, the client’s money doubles every six years.

Had I made the same claim I would be subject to all sorts of investigations.

Here’s the bottom line folks – if it sounds to good to be true, it is.

You are not going to double your money (earn 12% annually) by buying Equity Indexed Annuities and if you do, you should take some of that gain and quickly short the insurer (this is not investment advice) as they are not going to be around long.

ProducersWeb should do a better job policing their blogs.  At a minimum, someone posting such outrageous claims should be required to show evidence that an actual product has earned such returns and has the possibility to do so in the future.

At the end of the day, this sell in May annuity strategy is just an April fools joke.

Scott Dauenhauer, CFP, MSFP, AIF

P.S. I’m not going to put the link to the blog here, it’s just not worth giving credit – but if you want the link you can e-mail me…or just troll the ProducersWeb blog site.

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