Annuity: A Great Investment Vehicle For You

By Compuquotes Team on March 27th, 2008

You have a stable job. You're earning more than the average worker sitting next to you. You have enough money to spend. With luck (and hard work, of course), you are living comfortably. However, this feeling of comfort shouldn't stop you from saving and rolling your money to grow. You may live comfortably today, but deep in credit tomorrow.

Having an investment is the wisest thing that you can do while you are still young and earning. For one, you will not be tempted easily on using the money because a third entity will be managing it. Two, interest rates will appraise your money's initial value. Three, your future is securer. And one of the best investment vehicles is annuity.

Investment options available for you

Starting an investment may be a little confusing for you. But when you get to learn the ropes, it is basically putting more value into your money by putting it in a number of investment vehicles.

There are a number of investment vehicles:

1. Stock. A stock is a share of ownership in a corporation. This can either be common or preferred stocks. The shareholder or stock owner earns a return on his investment by trading his stocks. That is, buying or selling stocks in the stock exchange depending on the predictive increase or decrease of the stock price.

2. Bond. A bond, on the other hand, is a debt security. To avoid Public Offering of company stocks, a bond is issued instead. It is a form of borrowing money from the public. In this case, the bond holder will receive back the principal plus the interest at a later date called bond maturity date.

3. Mutual fund. A mutual fund is a collective investment that consists of stocks, bonds and other financial instruments. It is managed by a fund manager as a sort of portfolio. It is usually a pool of money from a number of investors. Every dividend and interest as a result of capital gains will be shared among the investors.

4. Annuity. It is basically a financial contract of a series of payments between two parties -- a company and an individual or organization. The payment consists of the principal plus the interest. The company referred herein can be a trust or charity company but a life insurance company is the one who usually offers an annuity contract plan.

What makes annuity different (and far better) from the rest?

Easy payment. The general categories for an annuity are based on payout and return. For the payout, it can either be immediate or deferred. Immediate payout means that payment will start right after availing the annuity. Deferred payout, on the other hand, means that payment will only start at a later date.

Flexible return. For the return, it can be a fixed or variable return. A fixed return means that a guaranteed payment is possible regardless of the fluctuation of the industry interest rate. On the other hand, a variable return means that each series of payments is influenced by the market fluctuation.

Manageable and secure. Either way, annuity can compete with the previously mentioned investment vehicles because it is more manageable and is not dependent on the financial standing of a company.

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