Equity-indexed annuity

Equity-indexed annuities are termed as one of the most famous type of annuity among the various options available. A guaranteed minimum return can be ensured in it, if one agrees to compromise and fix a maximum rate of return. In another words one can ensure a minimum rate of return if one is willing to limit the maximum possible return that one will be entitled to receive in future.

By investing in an equity indexed annuity you can't loose your money, at the end of a year, your principal will never go down. The investment in equity indexed annuities limit your downside risk and gives you unlimited upside potential. For example If you invest $200,000 in the first year, and the market falls by 10%, the value of your investment will remain $200,000. And in the second year, if the market goes up by 20%, then your investment will be worth $140,000.

Annuities defer the taxes on your gains which make them a prudent way to earn a comfortable return on your money. A specified and company-guaranteed return is offered by fixed annuities which is paid as the guarantee in the form of modest returns ( all this happens because fixed annuities invest your premiums in interest-bearing obligations, whose interest rates have historically trailed stock-market returns).

Security-based annuities became so popular during the previous bull market because the security of a guaranteed return is combined with the allure of participating in the booming stock market by the insurance product developers.

Described as the best of both worlds: a market-driven investment with potentially attractive returns, plus a guaranteed minimum return, Equity-indexed annuities prove out to be a great offer for customers.

Equity Index annuity have not been considered as an investment product subject. The brokers and agents for equity index annuity are tied to indexes of market activity and not to the performance of individual stocks or funds. Keeping all these things in mind, variable annuity products must be registered with the SEC, which must issue prospectuses and can only be sold by professionals with securities licenses. Brokers donot need a securities license for Equity Index annuity which are not federally regulated.