Final answer:
Equity index annuities are conservative financial products that aim to provide a balance between potential gains from the stock market and protection against loss, making them less risky than variable annuities but with the potential for higher returns than fixed annuities.
Step-by-step explanation:
The question is asking about the characteristics of equity index annuities compared to other types of annuities and investment choices. Equity index annuities are financial products that provide returns based on a stock index but usually have a guaranteed minimum return. They are different from variable annuities, which allow individuals to invest in various asset portfolios that can include stocks, bonds, and money market instruments. Because of this, equity index annuities can be considered to invest conservatively, since they try to balance potential gains from stock market performance with a certain level of protection against loss.
Household investment choices typically involve a tradeoff between risk and return. The higher the risk an investment carries, the higher the potential returns need to be to attract investors. Equity index annuities are designed to provide a compromise by offering the potential for higher returns than a traditional fixed annuity, which has lower risk and lower returns, but without as much risk as direct investment in stocks.