Originally Posted by Mysto
Justin did a quick calculation that these funds (the original thread) should return about 9%. That might be true mathmatically, however, in actuality these equity annuities have huge front-end commissions and large fees that make them one of the worst investments on the planet.
You just can't get the expected return from an insurance company. What you get is insurance.
For the record
the returns I calculated (roughly) for the risk-hedged product I mentioned were ~6.6% average annual return over the 1997-2006 10 year period.
I called the credit union offering this deal. Obviously I didn't read the fine print!
The risk-hedged product is offered as a segue into a full brokerage account (w/ Vanguard funds) and the min. acct balance is $3000. The risk-hedged product is called a "Bridge" account and has a maximum balance of $3000 (after that you have to go to the brokerage acct). That's the catch - you can't have any serious money invested in the risk-hedged account. They also charge $1.50 per month, which equates to 0.6%/yr on a $3000 balance. No other fees/early withdrawal penalties apply.
So, the 10 year avg annual return is more like 6% per annum. I'd stick with CD's or a bond.
The "point" of the Bridge acct offered by the CU is to make account holders aware of the risks of investing (you may not make anything!) while the stakes are small.