We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • To average or not to average?

    July 5, 2011 by Jack Marrion

    Published 7/1/2011

    I have often heard agents suggest that averaging should be used to measure index movement if one thinks the market will be volatile. Such an approach would be used instead of measuring the index gain or loss from one start point to one end point—the annual point-to-point method.

    The belief is that averaging fares better when the market is moving around a
    lot. The reality is, no, averaging does not usually result in a higher index
    gain, except in the early stages of a bear market.

    In both the 2000 and 2008 bear markets, averaging the daily or monthly values
    extended the positive gains for a couple of months past the period when the APP
    method turned negative. However, when the bull market returns, averaging delays
    a return to positive territory.

    A look back
    If you look at 12-month periods over the past
    decade and use an annual reset approach, the mean annual S&P 500 index
    return was 8.14 percent. By contrast, a monthly averaging approach produced a
    mean return of 4.56 percent, or 56 percent of what the APP calculation
    generated. Does that mean averaging methods produced half the returns of APP
    methods?

    No, and for a couple of reasons. The first is that most approaches,
    especially APP methods, use caps that limit the gain, but averaging methods
    usually have higher caps. If you apply a 10 percent APP cap and a 12 percent
    averaging cap, averaging produces 76 percent of what the APP method does.

    The second reason is more annuities
    offering averaging methods also offer uncapped methods where participation is a
    straight percentage of the index gain, or the uncapped gain less a yield spread,
    which tends to raise the index gain even more.

    If you look at other historic periods when the market was volatile you get
    similar results. Averaging is not a better choice for choppy markets. Yet this
    does not mean averaging is a bad choice. It simply means that any method that
    needs index gains to produce interest will suffer in down markets.

    Could look good
    From spring 2010 to spring 2011, the
    unaveraged index showed double digit returns, but averaging the values limited
    annual gains to around 1 percent. Why the huge disparity? The reason is the
    markets began to dip in April 2010 and didn’t recover until October. Indeed, the
    stock market gain from fall 2010 to spring 2011 was just about the same as the
    gain from spring to spring.

    However, this negative effect ended. In fact, if the indices do dip this
    summer, yearly averaging could look very good. As an example, if the indexes
    dropped 5 percent each month from spring until autumn, an annual point-to-point
    look would show a loss in October, but averaging results in strong
    returns.

    Originally Posted at Senior Market Advisor on July 1, 2011 by Jack Marrion.

    Categories: Industry Articles
    currency