An Equity Indexed annuity is a relatively new breed of fixed annuities that have gained a lot of popularity with individual investors. Understandably, investors want to participate in the upside of the markets, and protect themselves against the down-turns. To do this, many investors have been turning to equity indexed annuities.
These investments are actually insurance contracts that you purchase from an insurance company or a bank. They are an engineered product designed to protect and preserve an investors principal (but not all of them are principal guaranteed), and participate in some of the upsides of the markets.
Most contracts are written for between 7 and 15 years, but there are some available in the 3-5 year range. The longer time-frame products often have bonuses available to the investor, or may have higher interest crediting methods in some cases. However, many of the shorter-term annuities have the best interest crediting available.
Interest is credited in many different ways. Generally there is a minimum amount of interest that will be paid even if the market is negative for the entire term of the contract. Additionally, interest can be credited based on formulas tied to the performance of the stock markets. The S&P500 is the most commonly used index for these calculations. The Dow Jones Industrials is also used by many companies.
To learn more about how these annuities and other annuities work, visit www.Great-Financial-Planning.com/annuity.html. Be sure to work with a Certified Financial Planner professional when purchasing an annuity. That way, you’ll be sure that your advisor has is putting your best interest first. Another great site for info on all types of fixed annuities is www.fixed-annuity-solutions.com.