Tuesday, February 01, 2005

How to Buy the Best Annuity

When deciding which annuity to buy, the most important thing to know is that you must buy the best annuity FOR YOU. Most people make the mistake of trying to find the world's best annuity. However, the mistake is that each annuity has its advantages and disadvantages. So what may be the perfect annuity for one person, may be the worst annuity for someone else. So how do we overcome falling into the "best annuity trap?" Well, the best way is to really define your goals such as:

-What is your timeframe?
-How soon will you need the money from your annuities?
-Do you want more liquidity or more returns?
-Is this annuity investment for income or long term growth?
-Is safety of principal more important than getting a great return?
-Do you see a need to ever pull money out of your annuities in case of an emergency?

These are just some of the questions you need to know the answers to BEFORE you begin the purchase inquiry whether it is for fixed annuities, variable annuities, or index annuities. The biggest mistake people make is not knowing what their own goals are. This is very hazardous when it comes to investing. Even more dangerous is when your investment professional sucks you into the "best investment" trap (investment of the day). A great professional will help you decide what is best for you by asking you about your goals. If he doesn't, you'd better run.

With that in mind, think about this. More money went into the U.S. stock market in March of 2000 than in any other time in the history of the markets. Do you think it's because everyone properly assessed their goals and decided it was the right time to jump in the market...I would guess not. It's the greed and the emotion and the fact that most people want to go "where the money is" instead of investing for their own goals. And what did the market do after that...well, you know the story.

So now that you know this, sit down and try to determine what your objectives are. Take some time and look at what you are already doing. See if what you are currently doing is working for you or not. If it is, great, and if it isn't then change.

Just remember, invest according to your goals, not according to whether you think the stock market is going up or down. Invest according to what your future depends on, not whether you think interest rates are going up or down. In the long run you will be much happier and probably much better off financially.

Ignorance is not bliss...
Tony Bahu

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