What advantage does an indexed annuity offer?

An indexed annuity offers the advantage of no risk of losing principal, which is a significant feature for investors seeking security in volatile markets. This type of annuity typically combines elements of a fixed annuity and a variable annuity, allowing investors to benefit from potential market gains while protecting their initial investment.

When an indexed annuity is established, the principal amount is protected against market downturns. This means that even if the index the annuity is linked to performs poorly, the investor will not lose the money they initially invested; it remains intact. In many cases, indexed annuities also provide a minimum guaranteed interest rate, ensuring that the investor does not end up with negative returns.

Due to this protection against loss, indexed annuities are appealing to conservative investors who want to avoid the risk of a declining market while still having the opportunity for growth linked to market performance.