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Annuity
Term category: General Investing, Retirement
In 10 words or less:  An investment that pays a fixed income stream to the investor.

Definition: An annuity is a type of investment that guarantees payments of specific amounts at specific times. You can either receive periodic interest or a lump sum payment. They come in two forms: fixed and variable. Fixed annuities are like CD's that pay a set rate of return. Variable annuities allow you to invest in stocks and bonds and the rate of return depends on how your investments do.

StockJargon Advice: Annuities are great for people who would like to receive a steady income stream. For example, if you had $1 million and invested that in a fixed annuity at 3%, you would receive $30,000/year in interest.  However, fixed income streams are risky if inflation ever picks up.

Annuities are usually offered by insurance companies. I'm not a big fan of insurance investments because of their low rate of returns. If you're looking for growth over income, I recommend using a different type of investment.

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