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Thursday, February 4, 2016

Differences between an annuity and a genuine stock and bond investment

By Davis Miller

For the average individual that is not used to the investment market, the variety of available investments can be overpowering. The main differences between annuities, genuine stocks and bonds are confusing. Before spending any money and choosing one or more of these investments, you might want to spend some time understanding the basics. Whether you’re looking to diversify your portfolio or start a new investment, the following guidelines will help provide a clearer perspective.


Stock investments

Stock market investing involves a varying amount of financial risk
Stock investments increase in value via capital appreciation
Stock investments are all about buying a percentage of a company that is publicly owned. Based on the general earnings of that company, your stock’s value can alter. If the earnings increase, then your stocks will also increase; likewise, if you invest in a low-performing company, your stocks will drop as well. It can be challenging to invest in stocks. However, the good news is the long term the returns can be quite significant. If you’re new to the investment market, consulting with a financial advisor to help you make the right decision can be the smartest thing you can do.

Find some time to read books on the investment market. Perform a thorough research on forums like Bogleheads to get a feel of the investment world, and try to understand the raw meaning of an investment allocation, bond, stock, mutual fund or ETF.  Exchange traded funds in particular, is a form of investment that keeps costs low. In time, those small fees and percentages will add up, and the amount you initially spent will increase.

Bond investments

Before making the decision to invest in bonds, you should know there are various ways to do it, including unit investment trusts, individual bonds and bond funds. If you’re attempting to diversify your investment portfolio, it is important to choose bonds that match with your needs and expectations. The majority of individual bonds are traded on the OTC (over-the-counter) market. In general, bonds are sold in denominations of $5,000. Buying a bond means that you’re loaning money to an issuer; this issuer can be a corporation, government unity or bank.

Bond yields differ and are influenced by time until maturity and interest rates
Bonds are issued by governments, municipalities and corporations

The issuer will use your money to fund special projects, and in exchange for the money you’ve spent, it gives you an annual fixed interest payment. The general prices for a bond are based on interest rates. If interest rates increase, the prices for the bond go down; if they fall, the bond’s value increases.

Differences between stocks and bonds

Also known as shares of stock, stock investments are an ownership interested within a certain company. Bonds on the other hand, are a special form of debt in the long term that makes the issuing corporation (the lender) promise to give back to you an amount based on a specified interest rate. The owners get stock dividends from stock investments, whereas bondholders get a paid interest rate. In an attempt to beat the market, many investors make the mistake of under-performing it; that’s because they usually end up buying and selling when they shouldn’t.

Annuities

As far as annuities are concerned, prospective investors should know that this form of investment is issued by an insurance company. Annuities are common retirement investments; they permit an investor to build up money that is tax-deferred, and then withdraw the money when that investor needs it. Annuities are split in 3 main types: fixed annuities – which provide a fixed-interest rate for a specific time period issued in the contract, variable annuities – which are an investment collection with tax-deferred earning, and indexed annuities – which grow based on the way the equity market performs.


Annuities are sometimes used to manage income cashflow
Annuities provide alternative investment options
both annuities and bonds are popular investment forms with extremely vast benefits. Annuities offer retirees a guaranteed paycheck that’s similar to a salary, while bonds provide guaranteed regular interest for a fixed period of time. Annuities are bought from life insurance companies, whereas bonds are bought from major corporations, governments and municipalities. An annuity is similar to a contract between an insurance company and an investors; a bond on the other hand, is a loan offered by an investor to a government body or business. 

Whether you’re thinking to invest in stocks, bonds or annuities, it’s fundamental to consult with a financial advisor first. Be clear from the very beginning and specify how much you’re willing to risk; express your expectations, demands and requirements, and settle on an investment plan together. A well-rounded investment portfolio might bring you significant returns in the long run.


About the author: Davis Miller is the writer to this article. He is a regular contributor at many sites and mainly focuses on business and finance related topics. Also he works for http://www.synaptic.co.uk/ where you can find various financial research tools for financial advisers and planners.

Images: 1 and 2: US-PDGov; 3. Annuityve/Wikipedia, "Types of Annutiies", CC BY-3.0

Saturday, January 30, 2016

How landlords can get the right insurance on their property

Getting the right insurance on your property as a landlord is vital. There is so much responsibility that comes with being a landlord that ensuring you have the right cover is crucial to making sure that your rental venture is a success. So how can you make sure that you get the right policy for you?

Shop around


So many different companies offer landlords insurance but each policy will differ in what it offers. As a starting point you need to be covered for all the essentials and more. A good policy, like the one offered by Homelet is one which is designed to cover you against the risk elements of renting out your property. From natural catastrophes like flooding and storm damage to fires and vandalism, it’s essential to cover all bases.

What exactly do I need to be covered for?


The spectrum of what you need to be covered for as a landlord is so broad. Firstly, it’s important to 
cover your home for everything from buildings to contents, legal costs and rent guarantees. There are many things you can’t plan for as a landlord, unfortunate events like storms and bad weather can be really damaging to your property if you get a leak or even worse, are struck by lightning. Buildings insurance is an essential part of your landlords insurance to cover you for all eventualities.

Furnished or unfurnished, you still need insurance


If your property is furnished, contents insurance is also important. Comprehensive cover for all furniture inside the home and in the garden is important. You can choose a policy which covers you from accidental damage by tenants such as a broken lamp or chair and a separate policy which covers you from malicious damage caused by tenants. Unfurnished contents insurance is a wise move if your house is unfurnished as it covers you for all the fixtures and fittings such as doors and bannisters.

Why is it important?


Protection for your rented property is essential for a number of reasons. For cover from non-payment of rent to loss of earnings and rehousing costs to liability for accidents, there are so many things to take cover out for that it’s important firstly to cover your back and secondly, some buy-to-let mortgage lenders won’t give you a mortgage without it.


Renting a home can be very costly to a landlord from the appliances to fixing fixtures and general maintenance so taking the time to shop around for the right insurance is vital.

Image: woodleywonderworks/Flickr; "What subprime crisis: Affordable houses are everywhere" CC BY 2.0

Sunday, January 24, 2016

The weirdest insurance fraud claims of all time

Fake documents, tampering with security equipment and phony life insurance claims are potentially more commonplace than one might suspect. Is it any wonder large corporations request seemingly arduous and redundant paperwork and documentation when receiving service requests and claims? The following infographic from Top Quote sheds light on some of the more wacky attempts at duping insurance companies out of their money.

The weirdest insurance claim frauds of all time- infographic

Till death do us part? Making the most of your inheritance

Death is a difficult and complicated matter, and end of life planning can seem like a maze of responsibilities. Before taking steps for yourself or a loved one, carefully consider the consequences of your decisions or the lack thereof. Executors can be appointed to carry out a will or assets can be classified in ways that automatically transfer ownership. Then there are death taxes, burial and funeral expenses and possibly insurance and other contractual agreements. Whatever the case may be, weigh the pros and cons of each step or station on the way to the final stop in life.

Till Death Do Us Part? - Making the Most of Your Inheritance- infographic