I heard about a type of annuity where some money is invested (I believe into the S&P 500) and other money is put into something like a CD. The contributor controls how much goes into the mutual fund.

The promise is that when it’s time to withdraw, say 6 years, no matter how bad the market does, you’ll get your money back at minimum (so you can’t lose).

Is this a legitimate and good investment? The promise that you can’t lose has me suspicious. I believe it’s offered by a business called Pacific Life but I couldn’t find it on their website.

Edit: I think this is an equity indexed annuity. But my question still stands on whether this is actually wise.

2 Answers 2


Pac Life is a reputable company which I have dealt with.

An interesting thing that I learned this year is that many of these structured annuity products are simply an index (S&P 500, Russell 2000, etc.) and a combination options. An example of one type, the cap involves a covered call and the floor of protection is generated by the purchase of puts, somewhat like an option collar. Implementing these on your own will tend to provide equal to better returns and/or equal or better protection as well (depending on the product). Another advantage of DIY (where applicable) is that you can commit to one year exposure rather an annuity's requirement of 5-7 years.

I am not familiar with the equity indexed annuity that you have described. It would help if you could find its name from your source. You could then read the details of the annuity at Pac Life's web site. If not available, contact Pac Life.

The simple answer is that risk and reward go hand in hand. If you are willing to give up some of the reward (a cap), you can achieve varying degrees of protection (limited/no loss). It's a legitimate investment for tailoring the R/R of an investment to your personal goals and tolerances.


This sort of investment is legitimate. If it´s a good investment depends on your personal risk-appetite and investment horizon.

You basically lower your risk but also lower your average returns over just buying an indexed fund. You basically buy insurance against a downward trend, but that insurance costs you.

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