Annuity

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.

TeenAnalyst 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.

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.