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URL:  http://boards.fool.com/quotsince-npv-is-a-negative-number-meaning-with-19671525.aspx

Subject:  Re: Annuity-calculating NPV Date:  10/5/2003  7:58 PM
Author:  BuildMWell Number:  37398 of 78168

"Since NPV is a negative number, meaning with this investment I'm starting with $199,000 or $30k more than I should I should pull out...have I got this right now?"

Yep, you are on the money. The AMEX deal nets you a return of about 3.52% based on the growth less expenses over 7 years. The Vanguard fund returns 4.42% over the same 7 year period. I would not like either choice. You can do far better than either of these.

Let's assume you just buy SPY (S&P 500) and hold the shares for 7 years. If the market grows at 8%, your $199,000 will be worth $341,000 in 7 years. Of course you lose the insurance you gain with an annuity and the fees you give up with Vanguard. In either case you are paying someone else to do the work that an index fund does automatically at much lower fees with no surrender charges...except brokers fees which should be minimal if you have an on-line brokerage.

Now, what I would do is to buy a portfolio of great stocks and hold on for the ride. There is no reason that you should not expect to net far better than 8%. You could pick 10 great companies and buy approximately $20,000 of each. The dividends would net close to what the AMEX fund is paying you alone.