You Can Minimize Market Risk
Participate in the market with no risk to your investment principal?
Yes, it is really possible. And I'll explain how.
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Let's first address a problem many retirees are forced to endure -- low interest rates. In today's financial climate, most people are lucky to be earning a 1 percent to 2 percent interest rate on their money. The problem for most people is there is no place else to go without putting their money at risk.
And based on the extreme volatility of the stock market during the past four years, who wants to take that risk?
Fortunately, there is now an alternative to low interest rates. Today, it's possible to reap the upside of the stock market without the downside risks.
Reward Without Market Risk
Introduced in 1995, equity indexed annuities are now the investment choice for many people who are looking for better gains, safety and guarantees with no downside risk to their investment principal.
How the Equity Indexed Annuities Work
These annuities typically mirror the performance of a stock index or indexes, such as the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average.
For example, the S&P 500 Index is often regarded as the standard for broad stock market performance. It is used to measure the average stock price changes of the 500 most widely held companies representing more than 100 specific industry groups. Historically, the S&P 500 Index has consistently outperformed fixed-interest products such as corporate and government bonds and CDs.
The credited rate is calculated from the growth in the S&P 500 Index, subject to a cap, from the start to the end of each crediting period. The current caps range from around 7 percent to 12 percent. Earnings are generally credited to you annuity annually.
Just bought my first SMA and was very happy to have gone through Immediate Annuities.com. I found them in an article in the Wall Street Journal. As a first time buyer, I had a lot of questions. But to their credit, they did a great job answering my questions directly or getting the right answers from the right people when they needed to.
Why a cap? Consider, would you take a little less to protect yourself from the downside? For example, if the S&P 500 were to go down by 28 percent, you would not receive a loss. Your investment would instead be credited with not interest.
Is there any question most investors would have been very happy with 0 percent from 2000 to 2002 when the market was down all three years?
You can enhance your long-term cash accumulation and retirement income options with the Equity Index Strategy. The average annual return of the S&P 500, from 1926 to 2003, was a little more than 10 percent.
If you are looking for safety of principal, a minimum guaranteed interest rate and the potential for double-digit investment returns, then the equity indexed annuity may be the right choice for you.