Chapter 18: Brokerages, Account Types, and Annuities

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“I tell ya’ this stock market is bad. It’s even worse than a divorce. You lose 50% of your net worth, but you still keep your spouse.” ‒ With warm regards to Rodney Dangerfield

(Psst. Have you ever wondered why they call us, “BROKErs?”)

Learning Objectives

In this chapter, you will

Be introduced to various types of brokerage firms and other options for holding your securities
Examine various types of investment accounts including regular taxable accounts and tax-qualified accounts
Investigate the constraints and benefits of using tax-qualified accounts for long-term investing
Examine the few advantages and the more numerous disadvantages of annuities as investments

By the end of this chapter, you should be able to

Describe various types of brokerage firms and other options for holding your securities
Explain various types of investment accounts including regular taxable accounts and tax-qualified accounts
Discuss the constraints and benefits of using tax-qualified accounts for long-term investing
List the few advantages and the more numerous disadvantages of annuities as investments

'Cuz Ya's Gots' t' Put Yer Money Somewhere!

It is time to discuss brokerage firms and the types of brokerage accounts they offer. Hey! Ya' gots' t' put yer money somewhere, right? We will also spend a bit of time thwacking those ugly blood-sucking creatures from the black lagoon of the insurance world, annuities. These miscreant contracts entice the uneducated with the promise of a lifetime income. Often too late, buyers of annuities find that the lifetime income they receive is only a small fraction of what they could have received if they had simply educated themselves about the various investment choices or consulted an ethical and competent financial advisor.

Presentation file - Study Guide

18.1: Brokerages
Brokerage firms range from major, full service houses to freelance offices that offer personalized service to deep discount, no-frills, Internet-only companies. Which type is right for you?
18.2: Account Types
There are various types of brokerage accounts but they fall into one of two classes, regular taxable accounts and tax-qualified accounts such as retirement, educational, or health savings accounts. Let's explore the details, advantages, and disadvantages of each.
18.3: Annuities
Annuities are contracts offered by insurance companies. They tout their one major advantage, lifetime income. They do their best to avoid telling all the other nasties that come along with these dreadful products. But hey!, they are great sources of commissions for life insurance agents. And that's all that matters to the insurance industry.
18.S: Summary
Congratulations ‒ You Have Finished Chapter 18 ‒ Brokerages, Account Types, and Annuities