A level of protection from loss

Despite a rebounding stock market, market gains have not dampened American's desire for protection. According to the 2013 Allianz Investor Market Perceptions survey conducted by Ipsos from July 24 - 29, 84% of consumers ages 25+ with $200,000 or more in investable assets said they want protection when planning for retirement, agreeing that one "should always have some kind of protection from loss, even if it reduces your potential gain."

95% of the respondents said they would like a financial product with no potential for loss, or some level of protection from loss.

Furthermore, they would also like that product to have the potential for modest growth or a balance of potential growth, rather than one with unlimited potential growth but also unlimited potential loss.

One well-established strategy for balancing risk and reward is through an equity-bond portfolio, often shifting assets into bond funds as the investor approaches retirement. However, bond funds may not provide true protection because they carry risk of loss. For example, defaults or rising interest rates can cause bond funds to experience negative returns, thus not providing the protection one might have expected.

A relatively new way to target additional risk with some level of protection is through an index variable annuity (IVA) — a different type of variable annuity (VA). By adding this approach as part of an overall portfolio, investors can participate in the upside potential of equity market growth, but have a level of protection against a portion of loss that helps create a balance of risk and return. This protection is provided through a portion allocated to an index option.

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