There are many types of financial investments such as stocks, bonds, mutual funds and annuities. Investing in an annuity has many advantages as well as disadvantages. Some people say that it is safer than stocks and most other investments while some people disagree. Let's first get to know the annuity definition. An annuity is an insurance product. It is a contract between you and the insurance company. Basically, you give the insurance company money and they will pay out income to you as outlined in your contract. Annuity payments are usually spread over many years. The money you put into an annuity may grow tax deferred which means your contribution is tax free until you take out your money.

There are many annuities that you can invest in. Some investors like to invest in fixed annuities, some prefer variable annuities and some prefer to invest in an annuity index. As with all types of investments, there are different levels of risk associated with investing in different types of annuities. The more risk you are willing to take on, the more your annuity account will grow providing the market is good and your annuity investments are doing well. But, lots of people invest in annuities because they would like to invest safely, hope to invest without paying taxes and like many of the guarantees that the insurance companies throw in.

You can choose to receive the annuity payments in one lump sum payment, monthly payments, quarterly payments or yearly payments. You can decide 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 want large payments for fewer number of years. While payments are guaranteed to a certain extent, there are a lot of expenses you will have to pay to the insurance company for the guarantees they give. This is why lots of people say annuities are expensive investments.