Direct Rollover

It is a monetary transfer classified as a rollover but which occurs from one investment company to another directly, often from one investment plan into another e.g. a 401(k) into an IRA. Direct rollovers must be reported but are not taxed, and therefore annuitants can avoid taxation of distributions by using this method.

Dollar Cost Averaging

The investment of a fixed amount of dollars at regular intervals in a variable annuity is called dollar cost averaging. This is a financial strategy that could, over time, ensure that the average cost per unit will fall below the average price or the market high; however, it does not guarantee profit or guarantee the avoidance of a loss.

Equity Index

It is a statistical measure used in a variable annuity to report the performance of a select group of stocks or bonds. When index appreciates in value, so does annuity.

Equity-Indexed Annuity

Equity indexed annuity is an annuity that offer a guaranteed minimum return rate; may also offer additional interest earnings based on the value of an equity index. With this type of annuity, your money accumulates tax-deferred at a minimum fixed rate of return. Your account may also earn additional interest based on the performance of an equity index.

Exchange Privilege

Exchange privilege is the feature of mutual fund that allows a shareholder to convert from one fund to another fund within the same mutual fund family. Mutual funds do not usually charge when an investor takes advantage of an exchange privilege. However, some funds do have specific parameters as to when or how many times an investor may use the exchange privileges.

Exclusion Ratio

The proportion of an annuitized payment that is a return of capital and therefore not taxable. It determines how much of each annuity payment is excluded from income tax and how much is taxable when income is received.

Effective Annual Yield

Effective annual yield is the rate used after the daily compounding and crediting of the annuity’s interest in a deferred annuity. The effective annual yield includes any first-year bonus and can be calculated using the rate bonus, a bonus paid on the base rate by some annuities.

Effective Interest Rate

The interest rate if an annuity is compounded annually. It is also called an annual effective rate or an annual effective yield.

Equivalent Taxable Yield

It is the yield that must be offerd on a taxable bond issue to provide the same after tax yield as that of a taxable investment.

Expense Ratio

The amount, as a percentage of your total annuity account balance, which you pay annually for investment and insurance-related charges is called expense ratio.

Also the charge stated as a percentage of total investment, that shareholders pay for a mutual fund's operating expenses, management fees and other overhead expenses. It is normally disclosed in the fund's annual report to shareholders.