Understanding Annuities

Even in today’s uncertain economic environment, saving or putting money aside for the future is still a paramount necessity. Unfortunately, saving can become overwhelming for some people when deciding where to invest. A simple and generally uncomplicated investment option to consider is annuities. Why? Well annuities offer guarantees.

To futher help you understand Annuities- An annuity is a contract between an individual and an insurance company. The annuity is an investment or savings instrument, and an annuity pays to a designated person, also known as the annuitant. The annuitant receives a specified amount of income for a specified time, or a lump sum at a predetermined date of maturity.

Annuities typically offer tax-deferred growth of earnings and may include a death benefit. Annuities fall into one of three types – fixed, variable, and equity-indexed annuities. With a Fixed Annuity, the insurance company guarantees that you will earn a minimum rate of interest during the time your account is growing. At the end of that time, the annuitant receives guaranteed periodic payments. These payments can occur over a specified period, such as 20 years, or for an indefinite period, such as your lifetime.

With a Variable Annuity, you choose to invest your purchase payments from a number of investment options, which are typically mutual funds. The rate of return and the amount of payments you’ll receive will vary and depend on the performance of the investment options you selected.

If you choose an Equity-Indexed Annuity, this is a special type of annuity in which your investment return is based on an equity index. This allows your interest to change based on the index to which your equity is connected.

Annuities will not provide a tremendously high rate of 15% to 25% returns, nor do they claim to double your money in three years. Instead, investors are provided with a guaranteed interest floor, generally around 3%, and a guaranteed amount of income available at a certain time. For this reason, annuities serve well for retirement, education savings, or for seniors wanting a safe and guaranteed return. I hope this article helped on understanding annuities and stay tuned for more free investing tips and smart investment strategies.

Securities Analysis 101

The goal of any financial analyst or stock technicians is simple: to beat the market. This victory metric is typically measured against the S&P 500.  This goal is basically boiled down to ones ability to predict the direction of the stock market and identify undervalued stocks that are poised to outperform. This may sound like a simple concept, but where it becomes murky is within the debate on which values are to be used in this determination. For example a fundamental analyst would insist that this underlying value can be determined best from the forces that affect the economy, industry groups and related companies. Essentially identifying the supply and demand forces that affect the stocks prices for the products & services offered. While a technical analyst will attempt to forecast future price movements based on examination of historic price movements.

 So which theory is best? Which strategy produces higher returns?  As a contributor of Stocknod my answer is both types of analysis should be used when analyzing securities, as the two strategies compliment each other in a full evaluation at both the micro and macro levels. To expound on this let’s look further at the question of whether markets are efficient. Just what is dictated by the current pricing of a security? Is the current pricing a fair market value? Or are there underlying forces that exist that have somehow skewed pricing? These are the questions and opportunities that we must uncover to identify the stocks that are undervalued and subsequently poised to outperform.

An “efficient market” in the academia level is defined as a market in which the price is an unbiased estimate of the true value of the investment. Simply stated, the current price of a security fully reflects all available information and is the fair market value. “All” being the sum value of all views whether bull, bear, or other held by market participants. It is a fair value based on the supply and demand value of the market. Any deviations above or below what is deemed as “fair value” is considered to be random and over the long term will reflect the true value. So it is this period of deviations where the opportunity exists in making profits trading stocks. So in short, the goal of any trader is to identify these existing anomalies or potential future anomalies and move in and out of the market accordingly. These anomalies will disappear almost as fast as they are identified and again is primary reason that Stocknod alerts have been such an effective trading tool in staying in tune with pricing strikes.

Most within the academia realm believe that security prices are deemed as “semi-strong” efficient. Remember by semi-strong we are referring to the fact that public knowledge is factored into the stock prices and it is relatively difficult to identify these deviations from the true value based on public information. And only new information should affect the price. Reviewing price reaction to breaking news, there seems to be evidence to support this theory. The flow of information and detection times have been increased due in large part to the internet, and market news are factored into the pricing almost immediately. Few will argue that a surprise, either negative or positive will drastically move the price of a security. I think we can all attest to this fact based on popular case history.

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