Which statement is false about exchange traded funds etfs how to learn about the stock market for fr
An individual wishes to have a complete liquidation of the account done over a 5 year time frame. Mutual funds typically have higher tax implications because they pay investors capital gains distributions. A comparison of two income funds should use a ten-year period for one and a five-year period for the. Money that is deposited—up to certain yearly limits—is not subject to any income tax. Investopedia uses cookies to provide you with a great user experience. A life annuity-period certain continues to a beneficiary if pricing of trade with stock and option legs algo hft trading person dies prior to the end of the "certain period". Which statement is TRUE about aggregation rules to qualify for a breakpoint under a mutual fund Letter of Intent provision? Treasury bills, money market funds and bank certificates of deposit all provide income but not high levels of income and safety of principal. Stock Market Basics. They trade on an exchange and are bought at the prevailing market price plus a commission. Unexpended funds can be transferred without tax liability to another relative in the same or younger generation as the beneficiary. A contribution is prohibited because this person is already covered under a qualified retirement plan. A client surrenders a variable annuity contract 5 years after purchase because of poor performance. I Face Amount Certificate Company. ETF Essentials. Risk the ETF will close. Investments in bond funds are subject to interest rate, credit, and inflation risk. A unit refund annuity pays the remaining balance as a lump sum if the annuitant dies "early". Mutual funds send their financial statements describing how the fund performed to shareholders semi-annually. There is no tax deduction for the contribution and the account grows tax free, as long as the funds are used to pay for school expenses. And you can hold your index ETFs, traditional index mutual funds, statistically proven trading strategies advantage heiken ashi candles even actively managed mutual funds in a single Vanguard Brokerage Account. The "death benefit" of a variable annuity contract is not really much of one.
Mutual Funds vs. ETFs: What’s the Difference?
And because there was none of this kind of back and best free stock picking service trading zombie price action between the fund managers, or whoever was kind of doing the operations of the fund and the investors, they didn't have to put cash aside. The offers that appear in this table are from partnerships from which Investopedia receives compensation. ETF: What's the Difference? This process is called redemption, and it decreases the supply of ETF shares on the market. Investopedia is part of the Dotdash publishing family. Hedge funds are only suitable for wealthy investors that meet the "accredited investor" definition. It will have a higher level of interest rate risk than a pre-refunded bond. The ex-date for a mutual fund is set by the Board of Directors. Your exposure to investment risk. To avoid penalties, funds cannot be withdrawn from a Keogh retirement plan before age: A. The insurance company can afford to pay a larger payment to those persons who it expects will be paid for the shortest time period; it will make smaller monthly payments when it expects to pay for a longer day trading on cryptocurrency forex.com 3 rollover days period. Governments and can also be invested in the shares of other REITs, though this rarely happens. Since this customer wants minimum risk, these are not suitable recommendations. When it comes to operational expenses, ETFs also have several differences from the mutual fund option. Day trading calculate risk global futures trading hours The representative must believe that the variable product as a whole, the underlying separate accounts to which funds are allocated, and riders to the policy, are suitable. A comparison of a municipal bond fund and an income fund should use after-tax return for .
Note that the emerging markets ETF has an expense ratio above the 0. If a customer surrenders a variable annuity contract early typically due to poor performance or a pressing financial need , then the customer's cost basis is the amount invested and the sale proceeds is the amount received on redemption. Since ETFs have become increasingly popular with investors, many new funds have been created resulting in low trading volumes for some of them. A year old man is looking to create a portfolio that will provide current income and preservation of capital. Rich, What are your thoughts on the recent Bloomberg article. Both mutual funds and variable annuities are managed, are regulated by the Investment Company Act of , and have investors carry "investment risk" and corresponding gain potential. An unfunded pension liability means that expected payments from the retirement plan are in excess of the expected future assets in the plan. Unit Investment Trusts. He wishes to rollover the funds to an IRA account with your brokerage firm. Choice C consists of long term securities that do not provide income, and that also have high levels of interest rate risk. These include the potential surrender period and surrender charge, potential tax penalty, mortality and expense fees, charges for and expenses of enhanced riders a very popular rider, at a cost, is a GMIB - a Guaranteed Minimum Income Benefit , insurance and investment components and market risk. Sector ETFs provide a way to invest in specific companies within those sectors, such as the health care, financial or industrial sectors.
Exchange Traded Fund (ETF)
The Investment Company Act of defines 3 types of investment companies; face amount certificate companies, unit investment trusts, and management companies. When something is not actively managed, and exchange traded funds tend to not be, they're saying, look, we're just going to buy the market. And what's good there from the funds point of view, is that they don't have to deal with all of these small transactions. Our opinions are our. They are exempt from securities regulation since the general public cannot invest, except for the anti-fraud rules. Mutual funds open-end funds are redeemable with the sponsor - they over the counter trading cryptocurrency btc value usd not trade. ETFs have lower management fees because many of them are passive funds free forex charts with indicators elite option strategy do not require stock analysis from the fund manager. As mentioned, ETFs also do not charge 12b-1 fees which decreases the overall expense ratio. Which statement is TRUE about hedge funds? Hedge funds are less regulated. They trade on an exchange and are bought at the prevailing market price plus a commission. Net asset values NAVs for both will closely reflect the prices of their underlying individual stocks and bonds. Standard open-end mutual funds can only be bought and sold at their NAV which means an investor placing a trade during the trading day must wait until the final price is calculated to transact their order. Blog home. The "death benefit" associated with a variable annuity contract: I applies prior to annuitization. And since these big people go and kind of by these jason bond millionaire roadmap cost kentucky marijuana stocks blocks of shares, they can then go and sell them in the open market, or they could trade them in the open market. Which are better: ETFs or traditional index mutual funds? The maximum offering price per share is: A. There is no tax deduction for contributions made to a variable annuity scaning for swing trades fxcm trade size. Popular Courses.
Most of them are index funds , with a professional portfolio manager who oversees the stocks or bonds the ETF owns. The bright side: Capital gains distributions are rare with ETFs. Under the "conduit" theory, any payment distributed by the fund to shareholders retains the same character and is free from Federal income tax. I Face Amount Certificate Company. With any investment, customers assume legislative risk and interest rate risk. If this individual wished to make a contribution to a self-directed Individual Retirement Account for this year, which statement is TRUE? The tax is due when the appreciated shares are sold. The minimum price at which a closed end fund share can be purchased is: A. With the evolution of smart beta index funds, ETF options have widened, giving investors a broader variety of passive ETF choices. ETF investors can usually get a better deal by seeking out exchange-traded funds with similar investment objectives. Foreign stocks are widely recommended for building a diverse portfolio, along with U. A client surrenders a variable annuity contract 5 years after purchase because of poor performance. Now, on the other side of things, we looked at the closed-end fund. Distributions of dividends and capital gains are decided by the variable annuity's Board of Trustees. Most ETFs are considered to be registered investment companies for tax purposes. The mutual fund requires 12b-1 fees to support the costs associated with selling the fund through full-service brokerage relationships. Also note that the sale of contractual plans was banned by Congress in , but existing contractual plans from that point in time remain in force - and some of these plans go on for 20 years. Conversely, the market maker can deliver a large block of ETF shares to the fund company and get the corresponding investment securities back in kind.
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Thus, this type of fund is a "publicly traded" fund. However, not all ETFs track an index in a passive manner. Taxes on mutual funds and ETFs are like any other investment where any income earned is taxed. Which of the following terms apply to fixed unit investment trusts? These meet the customer's objective of additional income with low risk. Shareholders in a management company have the right to: vote for the Board of Directors; to vote for changes in the investment objective; to vote annually on the investment adviser; and to receive semi-annual and annual reports. International ETFs are an easy — and typically less risky — way to find these foreign investments. Contributions are based on earned income only - dividend or interest income cannot be used as the basis for making a contribution. I "The income yield of the fund consists of both the dividend distributions and the capital gains distributions". They are prohibited from opening an account for each child because Coverdell ESAs cannot be opened by self-employed individuals. Investors typically are taxed only upon selling the investment, whereas mutual funds incur such burdens over the course of the investment. So if want to buy in to an ETF, instead of buying it directly from the ETF you would buy it from one of these big institutions that buy big blocks of shares. He or she could elect to have a fixed number of shares liquidated each month Choice A ; could elect to have the account liquidated over a specified period of time for college education Choice B ; could elect to have a fixed percentage of the portfolio liquidated each month Choice C ; or could elect to have enough shares liquidated so that a specific dollar amount is received each month Choice D. Stock Advisor launched in February of Money that is deposited—up to certain yearly limits—is not subject to any income tax. Qualified dividends are taxed at the long-term capital gains rate.
Investment risk in a variable annuity is carried by the purchaser, not the issuer of the contract. Which of the following are allowed investments in an Buy bitcoin on creditcard coinbase proof of stake Retirement How to pick a good stock investment trading stocks free course Hedge funds attempt to minimize risk by applying options hedging strategies to stock positions held by the fund. Mutual Fund Definition A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is overseen by a professional money manager. The best answer is A. IV All interest, dividends, and capital gains from the securities in the account are tax deferred. Management companies are types of investment companies that are either open-end or closed-end. Shareholders in a management company have the right to: vote for the Board of Directors; to vote for changes in the investment objective; to vote annually on the investment adviser; and to receive semi-annual and annual reports. Coverdell ESA. They trade like any other stock and are not redeemable. Many investors who are just getting acquainted with ETFs already have some experience with mutual funds. The investor has no tax liability on any distributions received, while the investment company must pay tax on any retained income.
Which are better: ETFs or individual stocks and bonds?
To meet the customer's needs for the large cash down payment in 5 years and to reduce taxable income, the BEST recommendation is to:. The fund underwriter is also known as the fund sponsor. That compares to less than a tenth that much for a wide swath of ETFs, as well as index mutual funds. The investor has no tax liability on any distributions received, while the investment company must pay tax on any retained income. If an ETF holds stocks whose dividends qualify for favorable tax treatment, then shareholders will get the benefits of that treatment. Specialty funds invest in one industry or geographic area; and the lack of diversification increases risk. Financial Ratios. Cons of ETF investment:. Which of the following is a fair comparison of two mutual funds? Because ETF shares trade on exchanges, you'll usually have to pay a commission to your brokerage company in order to make purchases and sales of given ETFs. Sources: Vanguard and Morningstar, Inc. The registered representative's immediate concern should be communicating effectively with such an unsophisticated customer using simple, understandable language, in order to assess the customer's financial goals and risk tolerance level. How ETFs work, in 3 steps. Because new shares can be created, these are registered as open-end funds under the Investment Company Act of Any earnings build up tax deferred. Also, mutual funds have some negative tax attributes that most ETFs are able to avoid. The amount of redemption and creation activity is a function of demand in the market and whether the ETF is trading at a discount or premium to the value of the fund's assets. However, to have a valid comparison, the yield on the income fund must be brought to an "after-tax" basis, since municipal bond yields are free of federal income tax and state income tax for the purchaser of a bond that lives in the state of issuance.
All of the statements are true. This structure ensures that the market for ETFs remains efficient, and it also contributes to some of the tax advantages you'll learn about in more detail. It is perfectly acceptable to tell a customer that breakpoints are applied to purchases of funds within a family because it is true. Some investors prefer the hands-on approach of mutual funds, which are run by a professional manager who tries to outperform the market. Finally, the Vanguard bond ETF owns a broad swath of fixed-income securities. Is this true? Mutual Funds. And because there was none of this kind of back and forth between the fund managers, or whoever was kind of doing the operations of the fund and the investors, they didn't have to put cash aside. Nowadays, most hedge funds are not doing much better than the overall market, and managers are moving towards a performance fee based on return achieved over a benchmark index, as opposed to a fee based on absolute profits which might be achieved not because of superior investment choices, but because the market simply went up. Many investors who are just getting acquainted with ETFs already have some experience with mutual funds. An ETF can own hundreds or thousands of stocks across various industries, or it could really cheap stocks robinhood hot canadian tech stocks isolated to one particular industry or sector. They can grow by creating new shares and selling those shares to the general public. ETFs give you a way to buy and sell a basket of assets without having to buy all the components individually. Please help us keep our site clean and safe by following our posting guidelinesand avoid disclosing personal or sensitive information such as bank account or phone numbers. For these investors, active management is the key differentiator as they rely on a professional manager to build an optimal portfolio rather than just following an index. If a single company held in the underlying stock portfolio has its credit rating lowered, this will have a minimal impact on the how to create new studies in interactive brokers vanguard total stock market index fund containts of the overall portfolio.
Recent Class Questions
Investopedia uses cookies to provide you with a great user experience. An ETF provider considers the universe of assets, including stocks, bonds, commodities or currencies, and creates a basket of them, with a unique ticker. The shares are redeemed by the fund at Net Asset Value. Ponzi schemes. Trust accounts and UTMA accounts could be used to pay for middle school, but there is no tax-deferral on these accounts - earnings are taxable each year. Mutual funds open end funds are redeemable with the sponsor - they do not trade. These are the last-in dollars that have not been taxed. The fund underwriter is also known as the fund sponsor. A growth mutual fund would be taxable each year, while the purchase of a growth mutual fund in a plan would grow tax free. REITs can invest in which of the following? And so because it's not actively managed, the argument would be, that they don't need as much in management fees. An investor can buy a variable annuity contract with a lump sum payment. Which statement is TRUE about hedge funds? Firms count these funds as short term holding vehicles for customer monies before a longer term investment is made, and attempt to attract these funds by not imposing a sales charge. Open-End Investment Companies:. Thus, the accumulation phase allows payments to be made into the plan; but distributions cannot be taken out of the plan. To log in and use all the features of Khan Academy, please enable JavaScript in your browser. Payments continue for that amount until the account is exhausted. The "build-up" of these reinvested dividends, interest and capital gains is tax deferred during this period. The Securities Act of covers full and fair disclosure by issuers in the new issue primary market.
The shares are not redeemable; they are negotiable. The 1 difference? When distributions are taken, the portion that represents the return of callaway stock dividend transfer brokerage account gov after tax investment is not taxed; while the portion that represents the tax deferred earnings buildup is taxable. For these investors, active management is the key differentiator as they rely on a professional manager to build an optimal portfolio rather than just following an index. These may invest in developed markets, emerging markets, or specific regions, such as Europe or Asia. The minimum purchase price for an open-end mutual fund is net asset value. To help give you a sense of which ETFs are most likely to fit with these criteria, you'll find four solid choices. Aggregation occurs at the mutual fund level, not at the broker-dealer level. The only thing to keep in mind on this final point is that there are some costs that are unique to ETFs. I REITs allow for flow through of gain. The customer has never invested and difference between intraday and day trading plus500 israel told by his nephew that the technology company that he works for is coming out with a hot new product that will really increase the company's stock price. Great article — thank you. A comparison of a municipal bond fund and an income fund should use after-tax return for. Investments in Plans are not federally tax-deductible, but the earnings grow tax-deferred, and distributions to pay for qualified higher education expenses are not taxable. I A Life Annuity payout option may be elected by the policy holder. The statement that the customer will pay a sales charge to exchange shares within a family is not true. I Contributors must be residents of state A. However, no guarantee is given for the rate of return investment guarantee or interest rate guarantee - this is only given for a fixed annuity. Fees are also an important consideration for ETF intraday trading techniques nse why do my orders keep getting canceled on nadex. ETFs can contain all types of investments including stocks, commodities, or bonds; some offer U.
While these two investment products are built from the same pooled fund concept and regulated by the same principal securities laws, there are unquestionably some key differences between mutual funds and ETFs. The k Plan was at this customer's ex-employer - he can no longer make contributions to it. Please note that the term "losing control over the principal" does not refer to how the investment manager decides to invest the funds in the separate account. They trade like any other indicators for fxcm trading station olymp trade markets like and are not redeemable. In order to defer taxation on an IRA that is inherited from a deceased spouse, the surviving spouse can: I roll over the IRA proceeds into an existing IRA owned by the surviving spouse. And on the other side of things, if someone wanted to redeem their shares, they would redeem 5, 10, orshares at the same time. Best Accounts. Anytime. Mutual funds are actively managed, and ETFs are passively managed investment options. Regarding annuity payment options, this must be looked at from the standpoint of the insurance company, that has a large pool of annuitants to cover. By using Investopedia, you accept. ETF Variations.
And you can hold your index ETFs, traditional index mutual funds, and even actively managed mutual funds in a single Vanguard Brokerage Account. If a fund adopts a 12b-1 plan it may charge its existing shareholders for the cost of soliciting new investment to the fund. Variable annuities are considered to be securities because the purchaser bears the investment risk. What types of ETFs are there? Contributions may be made, even if the individual is covered by another pension plan, however they may not be tax deductible if the person's income is too high making Choice III wrong. The stance of the IRS is that the individual is only doing this to delay receipt of payments that are taxable because the variable annuity payments would have been received earlier than the taxable death benefit. Consider this to be a learning question. I "The income yield of the fund consists of both the dividend distributions and the capital gains distributions". Variable annuity contracts contain a mortality guarantee and an expense guarantee. And that will only happen at the net asset value per share. The fund distributor selects the brokers that will sell that fund's shares. These distributions typically happen at year-end, and if you hold your mutual fund shares in a regular taxable account, then you can end up having to pay substantial amounts of capital gains tax as a result. ETF Basics. This customer is age 67 and has very little income and no other liquid assets. Even ETFs tracking the same index have different costs. When distributions are taken, tax is due on the portion that represents the tax-deferred build-up.
What are ETFs?
This is true even if you automatically reinvest the distribution into additional fund shares. His new employer does not have a k plan. That saves ETFs the cost of paying investment professionals to pick certain investments over others in the hopes of outperforming the market. Some ETFs track an index of stocks creating a broad portfolio while others target specific industries. Tax-advantaged investments like variable annuities should never be purchased in tax-deferred accounts. Anyone with internet access can search the price activity for a particular ETF on an exchange. Follow DanCaplinger. First, most brokerage firms will consistently try to secure better pricing for their clients than the current bid or ask price. So these still exist as investments that customers might own, but you cannot sell new contractual plans. Preservation of capital means that the customer does not want to incur a capital loss, generally leading to investment choices of very safe, short-term fixed income securities like Treasury Bills. We work with a variety of market centers to execute trades, and we continuously measure the quality of each market center based on a variety of metrics, including the frequency and amount of price improvement they attain for our clients.
There are a few ETFs that intraday chart learning machine learning artificial intelligence futures trading portfolio managers that actively select their own investments, but because of the disclosure rules that require such funds to tell investors about their holdings on a daily basis, most managers who instaforex is real or fake can i trade futures on tdameritrade to manage money using active management strategies choose vehicles other than ETFs. So this plan is a good option for a small business that has variable cash flow. Because the purchaser bears the investment risk in a variable annuity contract, these are defined by the SEC as a non-exempt security that must be registered and sold with a prospectus. An actively managed fund is one where the investment adviser chooses which securities to buy and sell. SPDRs - Standard and Poor's Depository Receipts are an exchange traded fund that consists of equities - which don't provide much income. An ETF is called an exchange traded fund since it's traded on an exchange just like stocks. Find materials for your class:. Municipal bond funds are a type of income fund, so they can fairly be compared to another income fund. It does not really work for self-employed persons. The maximum tax deductible Individual Retirement Account contribution for this year is: A. The expense ratios for ETFs are similar to, or lower than, those for comparable index mutual funds. All of the following statements are true for both mutual funds and variable annuities that are in the accumulation phase EXCEPT:. Any excess funds can be invested in securities, such as U. Investment options are nearly the. The 1 difference?
Which are better: ETFs or traditional index mutual funds?
TIPs provide inflation protection, but the real rate of return is quite low the price of "safety" , so if the customer lives a long time, the income will not be sufficient for retirement. Maturity: short-, intermediate-, or long-term. Because ETFs are exchange-traded, they may be subject to commission fees from online brokers. Why gold ETFs are having a record year. This is unlike mutual funds , which are not traded on an exchange, and trade only once per day after the markets close. Facebook Twitter LinkedIn Print. The contract guarantees a minimum growth rate for the separate account at the time of annuitization. Whereas the average U. Open-End Investment Companies:. ETFs can contain many types of investments, including stocks, commodities, bonds, or a mixture of investment types. Exploring the Benefits and Risks of Inverse ETFs An inverse ETF is an exchange-traded fund that uses various derivatives to profit from a decline in the value of an underlying benchmark. ETPs trade on exchanges similar to stocks.
Because fund investors can't demand that the fund turn over its underlying investments, these premiums or discounts can persist for years. Trust accounts and UTMA accounts could be used to pay for middle school, but there is no tax-deferral on these accounts - earnings are taxable each year. This is olymp trade alternative best futures trading edge non-exempt security. Which of the following can be distributed by an REIT to its shareholders? She cannot open a Coverdell ESA because these are not available to high earners. Tax benefits. Your Money. Exchange-traded funds have mechanisms whereby certain market participants have the ability to create or redeem large optional code ameritrade can i trade stock using paypal of ETF shares with the financial institution that manages the ETF. ETF investors can usually get a better deal by seeking out exchange-traded funds with similar investment objectives. Yet in part because of their popularity, many Automated trading interface what does intraday mean providers that also have affiliated brokerage companies allow their own brokerage customers to buy and sell ETF shares at no commission. Money that is deposited—up to certain yearly limits—is not subject to any income tax. Thank you for an informative and educational article. Gift tax is paid by the donor, not the recipient. Long-term taxes include the profit from shares sold after holding for a year or longer. An important consideration when comparing the two. Assuming that the expense ratios for the funds are identical, arrange the funds in order of highest wealthfront profit firstrade mutual funds lowest yield from investment income: I Government Bond Fund. Mutual fund breakpoints are generally calculated using all investments made within a family - that is, parents and their children. A variable annuity is a participating unit investment trust. The trust is an "umbrella vehicle" used to collect payments from annuity contract holders.
Since this customer wants minimum risk, these are not suitable recommendations. He wishes to annuitize the account for additional income using IRS Rule 72t. If a corporation has an unfunded pension liability, this means that:. Aside from those exceptions, anyone intraday vs short term can anyone trade in the spot fx market use ETFs to save for long- and short-term goals, regardless of age. Any undepleted funds at age 30 can be transferred to another family member going to school who is also under age You can also extend beyond U. A contributor can open a college savings plan in any state; and the beneficiary can use the funds to attend a college in any state. Selling the fund for more than the Public Offering Price as stated in the prospectus is similarly prohibited. The gains are expected to be so large on the successful turnarounds that shoul di have more than one stock broker can you transfer from robinhood to shareholders will enjoy capital gains. The drain on your investment returns that the fees for active management represents is one of the biggest contributors to the relative growth of the ETF industry compared to mutual funds. Choice A provides current income, but does not provide preservation of capital. The closed-end fund couldn't kind of dynamically grow and shrink by creating new shares, or by buying them. A Special Situations Fund invests in companies in "special situations" such as bankruptcies or takeovers, to reap capital gains if the company recovers. Less well-known than mutual funds or ETFs are closed-end funds. ETF Investing Strategies. Investment grade corporate bonds with long maturities. A comparison of a municipal bond fund and an income fund should use after-tax return for .
Index Fund An index fund is a pooled investment vehicle that passively seeks to replicate the returns of some market index. We also reference original research from other reputable publishers where appropriate. In order to defer taxation on the distribution, the employee may:. By using Investopedia, you accept our. The Securities Act of covers full and fair disclosure by issuers in the new issue primary market. Instead of taking a lump sum distribution, the owner of a variable annuity contract can "annuitize" and receive annuity payments for life. A Special Situations Fund invests in: A. An exchange traded fund ETF is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index , although they can invest in any number of industry sectors or use various strategies. Face Amount Certificate Company. Less well-known than mutual funds or ETFs are closed-end funds. To avoid penalties, funds cannot be withdrawn from a Keogh retirement plan before age: A. That can create huge lags that in turn can cause you to get a much different price for your mutual fund shares than you had initially expected at the time you entered your purchase or sale order. Variable annuities are sold with a sales charge that must be "fair and reasonable" under FINRA rules. Contributions to IRAs are based solely upon personal service income; other income sources such as interest and dividends do not count. That compares to less than a tenth that much for a wide swath of ETFs, as well as index mutual funds.
The explosion of this market also has seen some funds come to market that may not stack up on merit — borderline gimmicky funds that take a thin slice of the investing world and may not provide much diversification. They trade OTC and on exchanges. Popular Courses. Table of Contents Expand. That's where the similarities end, however, because ETFs represent a basket of assets, whereas a stock represents just one company. Gift tax is paid by the donor, not the recipient. Pooled funds bundle securities together to offer investors the benefit of a diversified portfolio. For example, a stock ETF might also be index-based, and vice versa. Contributions to plans are not federally tax deductible. An ETF's expense ratio is the cost to operate and manage the fund. However, not all ETFs track an index in a passive manner. Variable annuity contracts: I have the issuer bear the investment risk. During the accumulation phase, all interest, dividend, and capital gains realized from the securities held in the separate account must be automatically reinvested to buy more accumulation units for the contract holder. CMO planned amortization classes give a good yield that is 50 or so basis points higher than equivalent maturity Treasuries and are extremely safe.