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Investment Types

There are a lot of different investment options out there and understanding them all can be tricky. We will give you an overview of several options you can pursue to help you make the best choice.

Mututal Funds

 Money Market

 

Bonds

Simply speaking, a bond is a loan. However, the conventional roles of borrowing are reversed, and you become the lender as opposed to being the borrower. Bonds are typically issued by the government, state, local municipality, business, or corporation in an attempt to raise funds for various expenditures.

There are several benefits of bond buying. You can experience higher yields which is great during periods of declining interest rates. You also have security. When a company is liquidated, as a bond holder, you can often be given priority over a stockholder. This makes it easier to receive payment. If you sell a bond before it matures you are often able to get more or less than your investment due to fluctuating values. Interest on bonds is usually exempt from state and local taxation, as well as federal with some cases. Bonds are also great because they are fairly low-risk investments.

There are several different kinds of bonds you can choose from:

 

CD's

A CD is a type of savings account that offers a high fixed interest rate for a certain length of time. It is only after that time (i.e. 6 months, one year, etc.) that you will be able to access your funds. If you choose to withdraw money before your CD has “matured” you will incur a sizeable fee. CDs are a great way to save and earn money. There are many different types of CD’s that come with their own unique benefits.

First you will want to choose the term of your CD. This can be varying lengths usually 1, 3 or 5 years. Then you will want to decide which type of CD you want to invest in. Lastly, you will want to check with different financial institutions to see which rates are available and find the one that works for you. Remember to seek out online institutions as well for more competitive rates.

 

Stocks

A stock is a share in the ownership of a company. Stocks represent a holding on the assets or earnings of a company. The more company stock you acquire, the more significant your stake in the company becomes. When you own stock, you become a “shareholder” and have an extremely small claim to all the company owns.

While stocks, and the ownership they represent, don’t necessarily give you a say in the daily operation of a company, your stake in the company does grant you the privilege of being able to vote on board members and other various issues the company may face. In addition, when a company issues profits to shareholders, you will receive a share.

There are two ways to make money with stocks – appreciation and dividends. When a stock “appreciates” in value, the stock is worth more than what you had originally paid for it. Thus, if you were so inclined, you could sell your stock for a profit.

The other method by which stocks can be lucrative are through dividends. Dividends are payments made to shareholders by a company that reflect the company’s earnings.

Dividends are often paid every three months (quarterly) and allow investors a steady return so they need not be concerned with the stock’s price in an ever changing market. However, companies are not required to pay dividends. This is something to consider when purchasing stock.

There are two types of stocks – common stock, and preferred stock.