Which feature of a variable annuity supports a disciplined investment strategy?

Which feature of a variable annuity supports a disciplined investment strategy?

• A. Model portfolio
• B. Dollar cost averaging account
• C. Voluntary rebalancing program
• D. Target allocation

Answer: (B)

The feature of a variable annuity that supports a disciplined investment strategy is dollar cost averaging account. This strategy involves regularly investing a fixed amount of money into the variable annuity over time, regardless of the price of the underlying investments. By doing so, investors can potentially reduce the impact of market volatility on their overall investment, as they buy more units when prices are low and fewer units when prices are high. This approach fosters disciplined investing by encouraging consistent contributions and mitigating the temptation to time the market. While other features, such as model portfolios, voluntary rebalancing, and target allocation, contribute to effective investment management, they generally focus more on asset allocation and portfolio management rather than the consistent investment behavior that dollar cost averaging promotes. Dollar cost averaging specifically emphasizes the importance of regular investment practices, thereby enhancing a disciplined investment strategy.

The feature of a variable annuity that supports a disciplined investment strategy is dollar cost averaging account. This strategy involves regularly investing a fixed amount of money into the variable annuity over time, regardless of the price of the underlying investments. By doing so, investors can potentially reduce the impact of market volatility on their overall investment, as they buy more units when prices are low and fewer units when prices are high. This approach fosters disciplined investing by encouraging consistent contributions and mitigating the temptation to time the market.

While other features, such as model portfolios, voluntary rebalancing, and target allocation, contribute to effective investment management, they generally focus more on asset allocation and portfolio management rather than the consistent investment behavior that dollar cost averaging promotes. Dollar cost averaging specifically emphasizes the importance of regular investment practices, thereby enhancing a disciplined investment strategy.