The ICA Guide

More documents

Recommendations

Info

The Boones and the Klausens Inflation has been relatively stable in recent years, but it can still be a formidable enemy over time. The only solution is to invest where your money can grow. To illustrate the difference ICA has made, let’s look at the hypothetical investments of two fictional couples over the 20-year period ended December 31, 2011. Margaret and Harry Boone Original investment $200,000 Total interest received $290,800 Value of investment as of December 31, 2011 $200,000 Annual income from a 20-year Treasury bond * The Boones’ long-term U.S. government bond paid the same amount, year after year … 4 The ICA Guide Twenty years ago — at the end of 1991 — the Boones and the Klausens retired. Each couple had $200,000 to invest. The Boones put their money in a longterm U.S. government bond that paid a guaranteed 7.27% a year. They thought their “safe” annual income of $14,540 meant they were set. Twenty years ago, you may have been able to get by on that. But it takes $23,795 today to buy what $14,540 bought in 1992! Here’s the worst part: When the Boones’ bond matured at the end of 2011, they went back to buy a new one and found the rate on 20-year Treasuries was 2.57% — which would provide them with only $5,140 a year. Of course, the Boones are guaranteed their original $200,000 nest egg — although that won’t buy as much as it used to either. The Boones’ “safe” investment, it seems, wasn’t so safe after all. $14,540 $14,540 $14,540 $14,540 $14,540 1992 1997 2002 2007 2011 * Long-term U.S. government bond rates (as reported by the Federal Reserve) have been substituted for periods when 20-year Treasury bonds were not sold, as in 1987–1992.
The Klausens invested their $200,000 in ICA and decided to take monthly withdrawals at an annual rate of 5% of their account value at the end of each previous year. Vivian and Joe Klausen Original investment $200,000 Total withdrawals $344,915 Value of investment as of December 31, 2011 $342,645 Annual withdrawal amounts from ICA … while the Klausens’ investment in ICA allowed their withdrawals to grow in most years. ,540 $14,540 $14,540 That meant they took $10,000 in 1992, representing 5% of their original investment. In 1993, they took 5% of their account balance as of the end of 1992, and so on. Because the value of their investment has gone up and down from year to year, their income has varied. They started out living on less than the Boones. But the Klausens’ income generally grew over time — and their original investment increased substantially. Over the long term, they enjoyed greater rewards than the Boones because, by investing in a portfolio of stocks, they chose to accept greater volatility, recognizing they could lose money. $10,000 $14,083 $20,338 Despite recent volatility, the last 20 years were generally good for stocks and for ICA. In all 59 of the 20-year periods in ICA’s lifetime, in fact, the Klausens would have done better than the Boones — often much better. $23,215 $18,355 02 2007 2011 1992 1997 2002 2007 2011 The hypothetical examples on pages 4 and 5 reflect actual historical results. Your investment experience, of course, will depend on the amount you invest and when you invest. Treasury bonds are guaranteed by the U.S. government; fund shares are not. The ICA Guide 5
Page 1 and 2: The ICA Guide 2012 edition Investor
Page 3: ICA: A 78-year history of success O
Page 7 and 8: Investing in stocks requires skill
Page 9 and 10: How ICA is managed A fund’s long-
Page 11 and 12: $100,000,000 70,000,000 50,000,000
Page 13 and 14: Oil embargo 0.6 7.9 .4 .1 Nixon res
Page 15 and 16: Time, not timing, is what matters D
Page 17 and 18: The benefit of time Long-term inves
Page 19 and 20: Growth over a wide variety of perio
Page 21 and 22: Customizing withdrawals Over time,
Page 23 and 24: A rare opportunity If The Investmen

The ICA Guide

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?