When financial markets are overvalued, fixed indexed products become an attractive solution for people looking to de-risk their exposure to market loss. Fixed index products are linked to indexes such as the S&P with the intent to give people an alternative to bonds and certificates of deposits (CDs) . The purpose is simple and clear, give people another option to participate in upside growth of market indexes while putting a floor under their account.To be fair, do not expect market like returns with these products, but over the life of the product, expect higher returns than CDs. These products can be attractive to people who do not want to see their account balance go down when traditional stock market indexes are negative because generally speaking, they don’t have the time to wait for the market to recover (they are close to retirement) or they don’t have the risk tolerance that makes a large market downturn palatable. Fixed indexed products are designed to lock in gains at the end of each crediting period and this new value becomes the new baseline floor, this is accomplished through purchasing options to indexes with an underlying guarantee the account value will never go negative. Fixed indexed products have surrender charges if the policyowner cancels the policy prematurely, similar to early withdrawal penalties on CDs.Fixed indexed products have favorable taxation treatment over CDs because gains are not realized until the end of the term or if the owner takes a penalty free withdrawal. If a product defers taxes on gains over a longer period of time, those gains mathematically will turn into a larger value (assuming the same interest rate). More upside potential and favorable taxation treatment make fixed index products appealing for people looking to de-risk their portfolio.If you would like more information about fixed indexed products and how they might fit into your portfolio give us a call at 425-246-4222.