Low Risk Investments Include Personal Annuities

When one thinks of investments, one usually envisions stocks

, mutual funds and other intangible securities. In contrast to these financial products, annuities are low risk investments that offer consistent, tax-deferred income. In the U.S. only insurance companies sell annuities. There are a number available differing in the payment options, underlying investment vehicle, and schedule of return. This article discusses how IRAs and annuities have similar features.

The classic IRA is a government mandated retirement product that allows a person to make contributions during the working period, and withdrawals during the retired period. The IRA accrues value without incurring taxes, but usually must be taxed in the case of withdrawing from the traditional IRA. A Roth IRA does not get taxed during withdrawal phase, but neither is it deducted from income during contributions.

Annuities are similar investment vehicles that allow a person to put money in, which is known as the deferral phase and is analogous to the contribution phase of an IRA. Afterward, the annuity begins a payout period which is taxed as earnings income where appropriate. Like an IRA the annuity can grow tax free. The big difference is that there are no limits as to how much money is put in each year, and also how much money is withdrawn each year.

Other low risk investments are not as secure. A money market deposit account is a sort of account for individual investors interested in keeping assets in a non-volatile, accessible place simultaneously achieving more earnings in comparison to a traditional savings account. Money market accounts usually are government-insured. Do not mistake this with a money market fund which are portfolios of such instruments, and thus are not federal government protected.

With respect to low risk investments, investors may be interested in GNMA mutual funds. During the stock market crisis caused at least partly by the property crisis of 2007, Freddie Mac and Fannie Mae fell victim to hemmorhaging drops in revenue forcing a statement from the Treasury to head off market panic. Ginnie Mae discovered that it was in a much better condition, showing little sign of being in need of help. The rules of the Federal government continue to demand that GNMA-titled funds to hold no less than 80% of assets in Ginnie Mae.

Another kind of low risk investment is a corporate bond. Giant corporations required to borrow money so as to execute day-to-day operations until enough earnings is generated to pay back the borrowed money. Acquiring money at these amounts is accomplished with the help of the sale of bonds, which are basically promises to repay plus interest. U.S. Treasury bonds count themselves as one of the most popular safe investments in the globe due to low default risk.

by: Gustavo Inez.

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