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Variable Annuities
These annuities have many of the same features as fixed annuities with the great difference being the investment choices built into them. Rather than a fixed and declared interest rate, funds are placed into accounts or funds with very specific investment goals. These accounts include stocks, bonds and other instruments which can all vary in value.

The owner can choose among several and in some cases hundreds of different investment pools all with different stated investment objectives from the most conservative to very aggressive investment objectives. It is a choice the owner makes with the broker. The performance of the underlying funds dictates the value of the annuity. It will fluctuate with the value of the securities in the chosen portfolio. There can be losses of principal in variable annuities. There is also the opportunity to grow value if the underlying investment grows.

One of the most confusing aspects of variable annuities is the manner in which the carrier calculates the value of the annuities. Instead of buying shares like a mutual fund, these annuities are quoted in accumulation units. These units act in many of the same ways shares do, but the name is different and it causes some confusion. The units are purchased every time a deposit is made into the annuity and the value of the units will change with every change in any security owed by the fund. These units are valued every trading day of the year.

The sale of variable annuities requires a securities license and the products require a prospectus.