How does the volatility of the S&P 500 affect an equity-indexed annuity?
The vast majority of equity-indexed annuities are linked to the S&P 500 Index (although some may be indexed to the Nasdaq, Dow, Russell 2000, etc). As the name indicates, the S&P 500 consists of 500 U.S. stocks from 10 economic sectors. These are not necessarily the 500 largest companies, but all of these stocks are widely held and the total market value of the 500 exceeds $6 trillion. The S&P 500 represents 80 percent of the market value of companies on the New York Stock Exchange. This index is widely regarded as the most accurate benchmark for overall stock market performance. No one knows for sure how the stock market or the S&P 500 is going to perform in the future, but most people agree that one of three things will happen: One – The index could go down each and every year . In this case, the owner would simply get all of his or her money back plus a small return. It is guaranteed that not a penny can be lost! Two – The index could go up each and every year . In this case, the ow
