What Nervous Investors Are Buying to Feel Brave
December 7, 2019 by Jason Zweig
One of Wall Street’s hottest investments lets you participate in most of the gains on stocks while sidestepping some of the losses.
The most important word in that sentence is “some.” If you buy a so-called buffered annuity, your satisfaction will depend on how well you understand that you are protected against some losses, not against all.
These variable annuities are a form of insurance linked to a market index. They trade away a portion of your upside in exchange for protection against some of the downside.
Investors bought $12.5 billion of these and other types of index-linked variable annuities in the first three quarters of 2019, up 63% over the same period last year, says Todd Giesing, director of annuity research at Limra Secure Retirement Institute. He estimates sales could exceed $20 billion in 2020.