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Basics of Investing Part 1

Posted by Arthur Peter on

Basics of Investing Part 1

Most Popular Investing Tools
        - Saving Account            - Metals
        - Life Insurance            - Business
        - Bonds                        - Futures
        - Stocks                         - Options
        - Mutual Funds            - Real Estate

1. Saving Account

Probably most common way of investing. Have a certain bank account at the bank like money market, CD, fix deposits, etc.

PRO'S
- relatively low risk .. since money is insured
- very liquid – easy to get money in cash when needed

CON'S
- very low interest .. lucky to get 1%-3%
- need to pay taxes on interest

2. Life Insurance

Probably 2nd in line when it comes to popularity. A Life Insurance is an insurance that pays out a sum of money either on the death of the insured person or after a set period. Often premiums are paid on a monthly basis.

PRO'S
- relatively low risk .. since money is insured
- great way of saving funds when not very disciplined in setting money aside

CON'S
- very low interest .. lucky to get 4%-8%
- need to pay taxes on interest

3. Bonds
 
A bond is a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

PRO'S
- relatively low risk .. if government or business doesn't go bankrupt
- Interest is better than bank account .. 4%-8%

CON'S
- Often times Bonds go per $1,000. so need larger budget to cover purchase
- need to pay taxes on interest


4. Stocks
 
The word is used freely to describe ownership in the stock market based on a specific company. But when you buy a company's stock, exactly what are you buying? A share of stock gives you an ownership position, also called “equity,” in the company that issued the stock. ... A company that issues stock is a corporation.

PRO'S
- Medium kind of risk
- Average growth of stock is good ... 5%-12%

CON'S
- Loose all your money when business goes bankrupt
- price can fluctuate a lot .. so could be stressful for some people


5. Mutual Funds
 
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature. Mutual funds have advantages and disadvantages compared to direct investing in individual securities.

PRO'S
- Professional Investors
- Diversification of stock .. keeps the risk lower

CON'S
- Lots of fees and expenses calculated


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