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By Tony Bahu
© All rights reserved.
Equity Index Annuity
If
you want to give your money a little potential to grow without making
it vulnerable to stock market downslides, an equity index annuity might
be a good choice. Under an equity index annuity, the insurer protects
you from losses in case the markets perform badly. The tradeoff is that
there is a limit to your earnings when there is an upswing in the
markets.
Under an
equity index annuity, the earnings on your capital are linked to equity
indexes like the S&P 500, Dow Jones or Nasdaq. It gives you a
minimum guaranteed return in the markets, in return for which there is
a cap on how much you can earn. An equity index annuity gives your
money more scope to grow than a fixed annuity does, but without the
risk of a variable annuity where your returns depend entirely on the
fate of investments you make.
Some
agents might pitch an equity index annuity as the best thing ever, but
you need to understand the concept thoroughly before you invest in one.
There could still be scenarios where you could lose money. Do not
purchase an equity index annuity without consulting an investment
advisor. You especially need to find out how the potential insurer
plans to let the returns roll in. Some unscrupulous companies have been
known to offer unbelievably attractive returns and then lower the
annuitant's potential after the first year without his/her knowledge. A
good insurance company would not mislead you by offering such huge
incentives.
Reading
the fine print and comparing the products of various companies before
buying an equity index annuity is crucial because it is a complex
concept. Different companies use different indexing methods. There is
also a participation rate, which determines how much of the increase in
index would be used to calculate the interest. Some companies spell out
a cap (upper limit) or floor (lower limit) on the returns. These are
just some of the things that affect an equity index annuity. You must
ensure you understand an equity index annuity's workings fully before
putting your money into one.
If you have trouble understanding finance and are worried some smooth-talking annuity agent might take you for a ride, do visit www.annuitymd.com .
This website exposes the games many unscrupulous agents play and lays
bare the means they use to deceive and mislead their clients, costing
ordinary people like you and me thousands of dollars. Don't take a risk
with your life savings. Let annuitymd help you.
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