There are common types of financial investments including stocks, bonds, mutual funds and annuities. Investing in an annuity has advantages as well as disadvantages. Some people say that it is safer than stocks and most of the other investments available while some people disagree. Let us first get to know the annuity definition. An annuity is an insurance company’s product. It is a contract between you and the insurance company. You basically give the insurance company money and the insurance company will pay out income to you as specified in your contract. Annuity payments are often spread over a long period of time. The money you contributed in the annuity may grow tax deferred which means you will not have to pay any taxes on your income put into the annuity until you withdraw your money.

Not all companies offer the same types of annuities. Some investors prefer to invest in fixed annuities, some prefer variable annuities and some like to invest in an annuity index. As with all investments, there are different levels of risk associated with investing in different types of annuities. The more risk you take on, the more your annuity account will grow as long as the market is not down and your annuity investments are doing well. But, some people invest in annuities because they want to invest safely, hope to invest without paying taxes and like quite a few of the guarantees that the insurance companies offer.

The income you are going to receive from your annuity can be in one lump sum payment, monthly payments, quarterly payments or yearly payments. You can choose to a certain extent how large each payment will be or how long you want to receive payments for. Some people want to receive payments for life but others may prefer receiving large payments for fewer number of years. While payments are guaranteed to a certain extent, there are many expenses you will have to pay to the insurance company in exchange for the guarantees that they offer. This is why many people think that annuities are expensive investments.