Questions? 1.800.239.0356

Back to Top
fixed annuities


Mutual Funds vs Fixed Indexed Annuities

Categories: Finance, Indexed Annuities

When looking into investing in the stock market, one popular choice has been mutual funds. Increasingly however, many investors are opting for a fixed indexed annuity instead. There are many good reasons for this growing popularity of indexed annuities.

A fixed indexed annuity is a retirement savings option where clients are given the ability to link their interest earnings to the performance of a stock market index, such as the S&P 500. The annuity earns interest based on the percentage change to the linked index, typically with some type of cap or other limiting factor. One of the big advantages of an indexed annuity is that, even though you may not get all of the upside gain, you are guaranteed never to lose money, even in a declining market. Mutual funds of course, do not make this type of guarantee and your funds are fully exposed to market volatility and risk. Most people find that this is a prudent trade off, capped interest earnings when the index increases, but no risk of loss when the index declines.

To learn more about indexed annuities, please visit our Fixed Indexed Annuities page. Also, you may find the following short video helpful in expanding your understanding:

Mutual funds are professionally managed portfolios consisting of many investors who buy shares and pool their money together to purchase stock in a large number of different companies. When investing in a mutual fund, clients are depending on someone else’s skill to manage the portfolio of stocks that the fund owns. The hope is that the professional money manager in charge of the mutual fund’s investments will make good decisions, which will hopefully result in a good return. As stated above, unlike indexed annuities, if a mutual fund loses money, so do the investors. When an investor decides to sell their mutual fund shares, there is no guarantee they will make a profit or even get back the amount of money they originally invested. Then there are the ongoing fees to consider, which can easily average between one and three percent annually.

If you are considering an investment in mutual funds, or if you already own mutual funds and are interested in exploring a principal protected alternative, give us a call today to find out more about fixed indexed annuities. As always, our goal is to assist our clients in making the best decisions possible for their unique and individual needs.