Equity index annuities (EIA) are complex and hard to explain, but investors may respond to one thing: these products have outperformed between 63% and 75% of mutual funds, according to a report from the Advantage Group. The analysis compares indexes of five different types of EIAs to performance data from Morningstar and Lipper for 2344 mutual funds. EIAs do not reinvest dividends, whereas mutual funds do.

While the report notes the strong relative performance of EIAs, it also notes, "burying your money in the backyard would have bested 75% of stock mutual fund returns." EIAs offer a portion of the return of an index such as the S&P 500, but they also do not return less than 0% in a given year. This downside performance protection has boosted the annuities' relative performance during the bear market.

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