Saturday, February 05, 2005
First of all, whoever called the "equity" index annuities wasn't really thinking. The reason I say that is because many people confuse these for variable annuities. So let me set the record straight.
Index annuities are purely fixed annuities with the potential for gain if a particular index does well. For the most part, your principal is protected (check with your financial advisor). Now, there are many types of Index Annuities and many features in different ones, so I would advise anyone going into one to be cautious and to do plenty of homework before they get involved.
Furthermore, because their are so many "styles" of these vehicles, it sometimes makes sense to diversify. As the competition becomes more aggressive, the features tend to get a little more exciting. I would warn you, however, to make sure you go with a very high rated company. I think some of these companies may not know what they are getting themselves into. This would ultimately mean less potential for a client in the future or trouble for the annuity company.
I am not for an equity index annuity nor am I against it. I believe the index annuity can have a place in an investor's portfolio if chosen properly. What you need to know is that they are not ever going to "hit a homerun", nor will they "strikeout." They are designed to achieve a 1% to 2% higher return than traditional fixed annuities. Whether they do or not is a different story. Stay tuned for more information on the Index Annuity.
Ignorance is Not Bliss!!!