Subject: IC940619: Beta, Annuity

From: "Gray Zhu, 800-289-2498, 212-279-6700" <[email-masked]>
Date: Sun, 19 Jun 94 00:13:48 CDT

==================    IC940619: Investment Club  ======================

1. Beta ................................................ Gray Zhu
2. Annuity (long, but you should know) ................. Gray Zhu
_______________________________________________________________________

1. From: [email-masked] (Naifang "Helen" Lu)

>What does Beta mean?  I come across the term "beta" when I read 
>the stock in the newspaper?  What does it mean?   Some figure
>shows 0.21, some stock figure shows 1.05.  How do we read it?

Gray: 

MorningStar definition - Beta: The market risk of a stock, fund, or
bond. by definition, the beta of the market is 1.00. Accordingly, a
stock with a 1.10 beta is expected to perform 10% better than the
market in up markets and 10% worse in down markets. The "market" for
equity is based on the performance of the S&P 500 Stock Index; for
fixed-income bonds, the "market" is based on the performance of the
Shearson Lehman Government/Corporate Bond Index.

Beta is a measurement of volatility, so it is also a risk measurement.
When the beta is less than 1.00, the stock has less volatility than
average, and vice versa.

2. From: [email-masked] (Naifang "Helen" Lu)

>I read some articles in recent US News and World Report.  One article
>on annuity interests me a lot.  Returen for selected annunity is high.
>I wonder how big risks are involvement in such investment.

Gray:

Annuities are contracts purchased by an individual in which an
insurance company pays out monthly payments to the individual
beginning on the agreed upon date and guarantees the individual that
the payments will continue no matter how long he lives. The contracts
guarantee payments for life!

In contract to life insurance which protects against untimely death,
annuities fill the need to protect against living too long.

How does annuity work? let's assume someone has been putting money to
his annuity account (think of something like an IRA). He has $140,000
in that account (SEPARARE ACCOUNT) when he is 65 year old and wants to
start getting payment from the insurance company. he would probably
work out with the insurance a plan somewhat like $10,000+interests per
year for the rest of his life. For a male at age 65, the average life
span is 79 years - insurance company assumes he has more or less 14
years left. Now, if this guy lives to 100, he wins, because he lived
longer than his financial sources could support him; if this guy dies
next year, he or his survivors will not get the rest of the payment
(there are all kinds of plans, his survivors may get it, but this is
telling the basics, assuming "straight life annuity").

An annuity contract enables an investor to give money to an insurance
compnay and have the insurance company put that money into one of its
investment portfolios (mutual funds - most likely).

FIXED ANNUITY: the insurance company guarantees the investor that it
will pay him a specified pre-determined amount of monthly payout
beginning on an agreed upon date in the future, that contract is known
as a fixed annuity.

VARIABLE ANNUITY: if the investor chooses the contract in which his
money will grow at a rate based upon the performance of a specified
portfolio of the insurance company and there is no guaranteed
per-determined amount of monthly payout, but rather a payout which
varies depending on the portfolio's performance, this contract is
known as variable annuity.

Fixed annuity is kind of like a CD, so it is NOT SECURITY; Variable
annuity is like a mutual fund.  as a matter of fact, variable
annuities are registered as open-end investment company (commonly
refers to mutual fund), so it is SECURITY.

annuity is a combination of insurance and investment.  Fixed annuity
faces purchasing power risk (inflation); while as mutual funds,
variable annuity risk depends on the portfolio.
==========================================================================

                           Disclaimers:

 a) Material on ICnet  is for general information only, and made available
    to  voluntary  subscribers  (subscription  is  free).    There  is  no
    guarantee of  accuracy in either text or numbers, so please read  with
    your own discretion.  Opinion expressed by any author is  his own, not
    necessarily  his  employer's.  Nobody on  the icnet-l or related (Hong
    Guang, Gray Zhu or their employers, or any other members, or ifcss.org
    which is the  ftp provider) except yourself assumes any responsibility
    for any consequences of using the material.

 b) You are free to forward and copy the material  for private use. If you
    do forward, it is mandatory to let it ALWAYS GO  WITH DISCLAIMER.  Use 
    of the material for commercial  purpose without written consent of the 
    author is prohibited.

==========================================================================
               ICnet - Investment Club on network
__________________________________________________________________________
  SUB/SIGNOFF mail to: [email-masked], with mailbody as: 
                SUB ICNET-L Firstname Lastname
  or:
                SIGNOFF ICNET-L   
  Post mail to: 
                [email-masked]                             
  Anonymous ftp at ifcss.org, in direcctory: /org/icnet

  Managers:     Guang Hong, [email-masked]
                Gray Zhu, [email-masked] (800)-289-2498
__________________________________________________________________________
  ALL INVESTMENTS INVOLVE RISK, STUDY CAREFULLY BEFORE INVESTING.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~