Can variable annuities be used as part of an asset allocation strategy?
A variable annuity s investment alternatives should have fundamentally sound objectives that seek long-term superior investment returns commensurate with the market risks assumed by an investor. For example, the Vanguard Variable Annuity Plan offers these investment choices: money market portfolio, high-grade bond portfolio, balanced portfolio and equity index portfolio. A variety of investment alternatives offered by variable annuities give you the flexibility to tailor your investment portfolio to meet your particular needs. You can allocate the investments in variable annuities to spread your risk across a balanced portfolio of stocks, bonds and cash reserves. There is no single answer to determining the best balance. According to Ibbotson Associates in Chicago, the long-term (70 years) return on cash reserves has been 3.7%, on bonds, 5.0% and on stocks, 10.3%, but your yield from investments in a variable annuity may be lower than similar investments held in an IRA or 401(k) accoun