Re: Annuities...are they a crap shoot?

On 2008-04-04 13:44:17 -0700, kastnna <kastnna@[EMAIL PROTECTED]
> said:

> Here's an exercise I used to use with clients:
> Pretend you could go back in time to 1966 (exactly 40 years ago when I
> used to use this example). Now suppose you took $10k with you and you
> had the choice of investing in an S&P500 mutual fund or the S&P 500
> subaccount of a Variable Annuity with a 6% secondary guarantee. The
> S&P fund has 0.18% fees, but the annuity charges 3%!!! Which account
> would have had more?
> 
> Surprisingly, in this simple back-test the VA account would be 4 times
> larger than the mutual fund!

It is well known that the past returns of financial products depends a 
lot on the starting dates and ending dates chosen for examples like 
this. Would the advantage of the secondary guarantee be as noticeable 
if, say, you began in 1956 and ended in 1996. or began in 1980 and 
ended in 2005, and so on? In examples like this it would be helpful to 
know the broad picture showing the whole range of possible starting 
dates and ending dates. That would give an indication of the actual 
probabillities that an investor would make out better one way or the 
other.

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