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The Wise Investor

5.7 Other investments
John and Kate sat in the park, as they usually did
on a Sunday afternoon, and watched the huge green
trees sway in the wind. The wind was icy cold, and
they both held warm coats around themselves as
shelter from the wind.
After they had rested, relaxed and soaked in the
peaceful feeling of the park, John returned to the
subject of finance once again.
"We have covered the three major sectors now,
Kate, and I have also made some comments on the
benefits and pitfalls of managed investments. There
are a few other issues that we should cover before
we move on to the next major topic for discussion.
First, I wish to talk about an investment product
that works in the opposite way to most investments.
These products go under various names, such as
'annuities' and 'allocated pensions', but they all have
the same basic nature. Imagine that you have a
large sum of money, and you wish to live from the
income that the money generates when invested.
Most people in this position are elderly people
who are entering retirement.
You can give this money to an institution, usually
an insurance company, and they will invest it for you
and pay you a regular income, derived from the
profits on the investments and part of the original
When we spoke earlier, Kate, I recommended
against having someone else manage your
investments, whether it be an individual or an
institution, as I believe that the fees and restrictions
outweigh the benefits.
Annuities, however, are an extremely useful