Deferred Income Annuities and Structured Settlements or Software at A Discount from a "Big Box" While Sitting Drinking Fizzy Drinks Making You Big Blue?

I get a number of investment newsletters for my personal investing. A recent email concerning Large Cap Stocks caught my eye. Diligent Investor, a newsletter from Agora Publishing focusing on small cap stocks, discusses what it calls "Big Lie No. 1: Buy Large-Cap Stocks That Pay Dividends"

Diligent Investor is critical of those that are saying that you should go out and buy “feel-good stocks” such as Coke, Wal-Mart and Microsoft. The "feel good stock" proponents'  argument is that if these companies can’t make it in the market, neither can any other stock. And even if their shares don’t appreciate, you’ll make money on the dividends.

Now here's what I found to be very interesting. As related by Diligent Investor:

"If you own Microsoft (MSFT), you haven’t made any money for the last seven years. But you have been handed a “nice” 0.32% dividend each year. Wonderful!

Your shares in Wal-Mart (WMT) over the same period have been skidding downward for six years… but you did get paid a 1.12% annual dividend…

Coca-Cola (COKE) is nothing to write home about, either. It lost you 20% from January 2005 to January 2006, but paid a 2.3% dividend…

Another perennial favorite, IBM, lost more than 25% from 2001 to 2006 but eked out 0.90% in dividends."

Observations

I am not passing judgment on any of these fine companies or giving you investment advice to buy or sell them. I'm just observing that what Diligent Investor states, supports the value of deferred income annuities and (if you are injured, or a survivor of someone who is injured or has suffered wrongful death) structured settlements. My presumption is that Diligent Investor is basing its numbers on a buy and hold strategy (i.e. not a trading account) The dividend yields on the above stocks, albeit for a relatively short duration, are unimpressive compared to structured settlement yields that could've been locked in or deferred income annuity yields that one can get today.

Deferred Income Annuities give you tax deferral on interest and the ability to know now exactly what you will get then, with no loss of principal. What may seem surprising is that we receive the most inquiries about this concept from sophisticated individuals whose day to day lives involve lots of financial risk.

Structured settlements offer income tax free income and the abilty to know now exactly what you will get then.

Comments

[Jerry]

If I understand this correctly, for the individual who wants to invest in the markets and other areas, purchasing an annuity like the one you mention above (can you say retirement fund insurance?) leads to some level of security in an area where you just can't really predict the future. Do you have any iron-clad guarantee on the payouts, and how do you get this future income free from taxes?

Thanks,
Jerry

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