These products are investment pools joined by interested investors who share a concern about minimizing risk. Fixed annuities are contracts sold by insurance companies that guarantee fixed rates of return to investors. All contributions are guaranteed against investment loss. A minimum interest rate is also guaranteed by the insurer. Fixed annuities protect participants from market downturn, but investors do not directly benefit from market upturns as in mutual funds.
Participants simply receive the declared interest rate each year regardless of market conditions.
In exchange for the insurance guarantees, fixed annuities usually do not allow complete transfers of money out of the product in a short period of time. Time delays and surrender charges may apply. These are also insurance company products that are usually offered in combination with a fixed annuity product to give participants more fund options. Variable annuities more closely resemble mutual funds. These products are called variable because they invest money in the general marketplace for securities.