MW Aragao & Company LLC

MW Aragao & Company LLC

2374 Diamond Hill Road, Cumberland, RI 02864

475-7570

http://www.mwaragao.com/new/mwaragao/default.asp

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Insurance - Financial - Law

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MW Aragao & Company LLC Are annuities a good investment for my money? I hear good and bad things. I do not recommend nor particularly like annuities for many reasons. To start, make no mistake, an annuity is a nancial product that is sold to you, usually by a broker for an insurance company. An annuity operates almost as the inverse of a life insurance contract; you give the insurance company your money and they promise you something in return, usually a stream of income at some point in the future. Of course, it is more complicated than this and, yes, I realize your funds are invested somewhere in some fashion. But, annuities pay a very high commission (usually, 8%) to the broker; so, if a commission is involved, you are sold something. Annuities are expensive: beside the commission, they carry very high operating expenses, usually 2-3% a year. There are also surrender charges (around 7%), which not only makes them expensive, but in exible in the event you needed access to your money before the pre-determined date(s). Adding up all these fees can create great lag on your investment results, from year-to-year, making the tax advantageous they offer nearly null in comparison. Annuities are also very complicated. If you have ever purchased one, you know rst-hand the amount of paperwork you are provided to review and sign. Also, after the nancial crisis of 2008, it was exposed that annuities carry a risk many investors rarely ponder: what happens if the insurance company fails? There is neither FDIC insurance (bank account) nor SIPC insurance (brokerage account) for annuities, although many states do offer limited protections to an- nuity holders. Granted, there is never a guarantee with any investment; however, in the case of an annuity, you would likely have it all, or at the least a large part of your assets, with just one insurance company. Buyer beware! Not all annuity contracts are the same, but I have yet to nd a situation where I would ever recommend one. Diversi cation and prudent, low-cost investment management can likely better serve your goals. If you want to talk speci cally about your investments or to start investing, contact me for a personal conversation. Michael Aragao President/Portfolio Manager 2374 Diamond Hill Road Cumberland, RI 401-475-7570 Q: A: investor@mwaragao.com www.mwaragao.com