Determining which, if either, strategy may make sense for you will depend on a number of factors, including your investing goal, interest rate environment, fees on your investments, your time horizon, and your tolerance for risk. First consider if you might be better off investing in a diversified portfolio, because either of these strategies (anchor or protected accumulation) may limit your upside growth potential—and the diversified portfolio may offer a greater long-term benefit.
You also need to consider when you will need access to these assets, because both strategies might penalize early withdrawals. For instance, redeeming a CD before it matures typically means forfeiting some or all of the interest earned, while annuities may levy a surrender charge representing a percentage of the account value. So if your goal is less than 10 years away, the protected accumulation strategy is not a good fit.
Bottom line:
The decision may well come down to your investor personality. With your principal protected from loss, would you gain the confidence to invest more aggressively than you are today?
- The protected accumulation strategy requires little action from you aside from your initial investment and an annual decision whether to lock in any growth.
- The anchor strategy requires that you invest the assets that are left over after establishing your anchor.