Floyd Miller Investments

About Us

Floyd Miller Investments Strategy

The market may be the absolute best place to invest over the next few years or the absolute worst. The fact is we cannot predict what the future will bring.

Risk Management – The Traditional Approach

Stock market risk is conventionally dealt with by retention, with an attempt to minimize and control it through diversification, asset allocation and having a long-term time horizon. The problem associated with this means of risk management for stocks/mutual funds are well documented and give investors a false sense of security, especially when overall markets are unchanged or increasing as they were in the 1990’s.

Asset allocation, diversifying investment funds between stocks, bonds, cash and other areas (such as real estate), helps to reduce risk but does not protect the investor from dramatic downturns in the market.

Risk Management – Floyd Miller Investments Approach

The primary objectives of an intelligent investment strategy should be to preserve capital and build upon it at a consistent, moderate rate in both bull and bear markets.
So what do we do about market risk? There are four things we can do concerning risks: 

1) avoid it, 2) attempt to control or minimize it, 3) retain it 4) or you can transfer it.                               

Listed below are examples of how a person can respond:

Avoiding Risk

If we are concerned about a plane crash we don’t fly.
If we’re concerned about stock market risk we don’t invest.

Controlling Risk

If we are concerned about our health we watch our diet and exercise.
We try to minimize market risk by asset allocation and diversification.

Retaining Risk

We decide to take the risk that our $50 lawn ornament will be stolen.
We decide to invest all of our 401-k in our employer’s stock.

Transferring Risk

We buy a homeowners policy to transfer our risk of loss by fire to an insurance company.
We buy a market-linked investment to transfer the risk of loss in the market to the issuer.

The majority of people who have money to invest put a substantial portion into the stock market. The minority chooses to deal with stock market risk by complete avoidance. But there is an opportunity cost in missing out on the sometimes-exceptional gains that investing in the market can provide. The answer to this dilemma is to transfer the risk of seeing in the market to a third party.

When you transfer the risk of loss of your house to a third party you pay a premium, even though you hope you never have to submit a claim. When you transfer the risk of market ups and downs to a third party you continue to hope that the market goes up in the long run even though you may not receive 100% of the increase. The fact that you may not get a return as high as the overall market is the “premium” you pay for the guarantee on the principal of your investment.

Tools of Risk Management

There are a variety of tools that can be utilized to intelligently design an investment strategy that creates protection from the usual risk inherent in investing in the market while allowing for potential growth that is tied to market performance.

The primary tools utilized by Floyd Miller Investments are Equity Index Linked Investments. These allow investors to benefit from the potential growth of the stock market while limiting risk to their underlying principal.

Each person who has saved and accumulated wealth and invested has had to choose between these two options:

1. Give up a degree of safety in return for greater opportunity for growth, or;
2. Sacrifice growth opportunity in return for a higher degree of safety.

Equity Index Investments provide a third option to consider, one that offers the power of money in the market with the comfort of money in the bank. 

Equity Index-Linked Notes

Issuers of principal-protected equity-linked notes such as Merrill Lynch and Salomon Smith Barney promise to return at least the original investment, regardless of market performance, at maturity. Unlike bonds, however, principal-protected equity linked notes generally pay little or no periodic interest. Instead, at maturity, the issuer of the note repays the original principal of the note plus an amount based on the appreciation of the underlying stock index (such as the S&P 500). Terms of the notes vary widely and they are based on a variety of indexes including sector and foreign indexes. Equity Index-Linked Notes are subject to the creditworthiness of the issuer.

Market Index Linked Certificates Of Deposit

Unlike traditional CD’s that pay a fixed rate of interest, the market rate CD is linked to the performance of a participating stock market index.  If the market goes up, the investment does too.  Yet, regardless of what the market does, the investor will get back the original principal amount at maturity.  In addition, the principal is FDIC insured up to $100,000 per depositor per depository institution.  Any gain in the Market Index CD is the obligation of the issuing bank and is not insured by the FDIC.

Historically, these CD’s have been issued for a term of 5 to 10 years.  However, the issuing bank usually provides for quarterly redemptions after the first year.  The Market Index CD is designed to be a “buy and hold” investment and is therefore subject to the risk of possible loss of principal if redeemed prior to maturity.

An investor in a market index CD can participate in the upside associated with an increase in the market with a FDIC insured guarantee of principal.

Tax consequences.  The investments are subject to rules that require the payment of taxes prior to maturity and are best suited for tax-deferred IRA accounts.

No current Income.  Instead of periodic coupon or dividend payments, you will receive your principal back at maturity plus a percentage of any stock market appreciation. Investors do not receive dividends relating to the underlying index.

Fluctuation in market price.  As the principal is protected only if the investment is held to maturity, the market price of the investments will fluctuate.  As market prices are influenced by supply and demand, and a variety of other factors, the secondary market price of the investments may not always correspond to the price movement of the index.

Other factors.  Although the insurers of equity linked notes generally have strong credit ratings, they are still subject to credit risk.  Should the index show a negative price return at maturity, the investor may receive only the principal amount of the investment regardless of whether or not the index was higher at some time prior to maturity.  Equity-index products may include conditions that reduce or limit the return including call features, participation rates, caps and averaging provisions.  Some investments may involve a penalty for early withdrawal.  Read the offering document for details.

Equity Linked Index Annuities

These tax-deferred contracts are written and guaranteed by insurance companies.  There are many different terms and variations available and some offer the flexibility of allocating among several major indexes.  The more attractive contracts offer annual compounding, no ceiling on the amount of gains as well as an annual reset provision.  The reset provision allows the index credit to be added and “locked in” on each anniversary.  It can never be taken away, regardless of future index performance.  Annuities are designed for longer-term needs such as retirement.  Most will allow for additional deposits of as little as $100.  Equity Linked Index Annuities are not FDIC insured and have no bank guarantee.  They are subject to the creditworthiness of the issuing insurance company.

Equity Linked Life Insurance

These contracts provide an appealing alternative to traditional life insurance policies that accumulate cash value.  The more attractive policies offer a minimum guaranteed annual rate (such as 3%) as well as offering the potential to earn a percentage of the performance of a major stock market index such as S&P 500.  Most policies provide an annual reset feature.  Cash value life insurance is purchased for long-term goals including retirement and estate creation.


Floyd Miller Investments strategy focused on preserving capital and building on it at a consistent, moderate rate in both bull and bear markets.  To achieve this objective, we primarily use market-linked investments.  These investments are particularly suited for investors who have an investment objective of principal protection with long-term growth potential.  They are not suited for investors who have the objectives of current income, need for liquidity, or who have an aggressive/speculative risk profile.

Floyd Miller Investments – your source for principal protected investments

As with all investments, these products involve certain risks and may not be suitable for every investor.  See a prospectus for a description of each offering, including risk factors. Floyd Miller Investments does not give legal or tax advice. Please speak to your legal or tax professional for such guidance. This document is neither an offer nor the solicitation of an offer to purchase any security.