What’s the Difference between Variable Annuity Sold by Mutual Funds and Simple Income Fund?

The world of investments can be a complex and complicated place. If you are looking to expand your portfolio, you may be wondering what the difference is between variable annuities that are sold by mutual funds, and simple income funds.

Let’s begin by first examining variable annuities that are sold by mutual funds.

Variable annuities are special types of funds that invest in the stock market, and in some cases, the bond market. Regardless of exactly what type of investments they make, these funds are generally referred to as mutual funds and cover a variety of investments designed to meet one common goal.

One of the main incentives of an annuity fund is that you are able to invest in the markets without having to single-handedly pick individual bonds or stocks; these funds diversify the investing process for you. Since these funds maintain a collection of different types of investments, your money is spread out which helps to reduce overall risk and investment loss.

Variable annuity funds come with their own set of benefits, of which the most notable is the simplicity for investing in stock or bond markets. This means you do not need previous experience, or time to dedicate to the process. Most variable annuities are a form of managed portfolio that allow you to select the funds you are interested in, based upon certain criteria such as “moderate”, “moderately conservative”, “conservative”, or “aggressive”.

Variable annuities that are sold by mutual funds are not subject to capital gains taxes when money is withdrawn, however they are subject to basic income tax rates. This means that your return on investment may be lower after taxes than another type of non variable annuity mutual fund account. Variable annuity funds also are generally prone to fees such as management fees, which are charged in addition to regular account maintenance fees.

Now, let’s take a look at simple income funds.

Simple income funds are a type of mutual fund that provides income from various types of investments. While many people consider simple income funds to be the same as bond funds, many of these funds actually hold stocks, and could be more accurately described as equity income funds.

When it comes to simple income funds, investors are generally more interested in earning basic income, rather than just capital gains. These funds are meant to be held for the very long term, and in some cases may never be sold. The income generated is meant to be a main source of personal funding.

Tags: bond market, capital gain, income funds, simple income funds, stock market, variable annuities