June 22, 20204 Investment Options You Should Know About
The investment world can be as complex or simple as you would like to make it. There are many options available from which to choose when you have your investment plan ready to implement. Let’s look at some of the different investment tools available in more detail so you will have a better understanding of each.
Stock is purchased as an investment in a company with the understanding that the company will be profitable, and the stock price will go up. The value of stock is dependent upon the market conditions at the time of purchase and the time of sale. Most people hope to purchase stock at a lower rate than they sell it for at a later date. Timing is everything in the stock market.
Bonds are loans made to corporations and governments. Borrowers get cash and investors earn interest, like loans you get for your home or car. Bonds are less risky than stocks since companies pay off all their debts (including bonds) before handling obligations to stockholders. Bonds are often sold in bundles that require a significant minimum investment.
3. Mutual Funds
Mutual funds are combinations of stocks, bonds, and other tradable assets. Mutual funds provide you with a way to diversify without having to select individual assets. Additionally, they offer the added advantage of significant purchasing power that comes from the size of the fund.
Money within a mutual fund moves in and out constantly in high amounts, which requires skilled, professional management. These professionals manage mutual funds on a full-time basis and are there to serve you.
When you decide to invest in cash (or a cash equivalent), we are referring to savings deposits, treasury bills, money market accounts, money market funds, certificates of deposit/share certificates, and even individual retirement accounts (IRAs). While they are the safest investments a person can make, they also provide the lowest rate of return when compared with stocks and bonds. In most instances, the Federal Government guarantees or insures these investments (e.g., FDIC, NCUSIF, etc.).
Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; It does not constitute legal advice. If such advice or a legal opinion is required, please consult with competent local counsel.