Like mutual funds, indexed annuities are tied to a trading index. However, rather than the fund sponsor trying to put together an investment portfolio likely to closely mimic the index in question, these securities feature a rate of return that follows a particular index but typically have caps on the returns they provide.
For example, if an investor buys an annuity indexed to the Dow Jones and it has a cap of 10%, its rate of return will be between 0 and 10%, depending on the annual changes to that index. Indexed annuities allow investors to buy securities that grow along with broad market segments or the total market.
Trading indices is popular among PlusFX traders due to its comprehensive terms, accurate quotes from several suppliers and versatile analytics. After all, in order to understand the logic of the index behaviour, you need to pay attention to the corporate news of each of the companies included, as well as on events affecting the wider industry as a whole.