Investments by yurtgc548

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									             Investments

Who wants to be a millionaire?
What kind of an investor are
           you?
 Rate all investment options according to
  three characteristics:
   Safety - Relative risk of losing money
   Rate of return - percentage earned on your
    investment
   Liquidity - ability to turn asset into cash
               Savings Options
 Passbook or Statement Savings Account
       Regular savings account at a bank or credit union
       Money is easily accessible.
       Guaranteed up to $100K by the Federal Government
       Trade - off is that interest rates earned is low
       (1 to 1 1/2%)
 Money Market Deposit Account
    Savings account that pays a higher interest rate, gives limited
     access to money in the form of checks, but requires the saver to
     maintain a minimum balance.
    Also protected up to $100K
 Certificates of Deposit
    Time deposits - seven days to eight years or more.
    Severe penalties for early withdrawal.
    Also protected up to $100K
          Government Securities
 Savings Bonds are issued by the Federal Government as
  a way of borrowing money.
      Purchased at 1/2 of face value.
      Earns a fixed rate of interest until mature.
      Attractive to those with limited amounts of money to invest.
      Also, earnings are tax exempt until the savings bond is
       redeemed.
 Treasury Bills
    Certificates issued by the U.S. Treasury in exchange for a
     minimum amount of $1,000 (in $1,000 increments) and
     maturing in 3 months to a year.
 Treasury Notes
    Same as T-Bills except they take 1 - 10 years to mature.
 Treasury Bonds
    Same, but with a maturity date of 10 years or more.
 Other Government Securities
    Tax-Exempt bonds, State Bonds, Local Bonds
     Corporate Stocks v. Corporate Bonds
 All corporations issue stock.         Corporations are not required to
 Stock represents ownership.            issue bonds.
 Do not have a fixed dividend          Bonds represent debt.
  rate (except preferred stocks).       Bonds pay a fixed rate of
 Dividends are paid only if the         interest.
  corporation makes a profit, and       Interest on bonds must always
  only then at the discretion of the     be paid, whether or not the
  board of directors.                    corporation earns a profit.
 Do not have a maturity date.          Bonds have a maturity date. The
  Shareholders are not repaid by         bondholder is repaid the value of
  the corp.                              the bond.
 Stockholders have a voice in the      Bondholders have not voice or
  company by electing the board          control in how the company is
  of directors (except preferred         run.
  stockholders).                        Bondholders have a claim
 Shareholders have a claim              against the property and income
  against the property and               of a corp. that must be met
  income of a company, but only          before the claims of any
  after claims of creditors have         stockholders (including
  been met.                              preferred stock).
                   Mutual Funds
 Pools the money of many individuals to buy
  stocks, bonds, or other investments.
    Advantages
       Professional investment manager.
       Diversifies investments resulting in lower risk.
    Disadvantages
       Management fees.
       Less control of how your money is invested.
       Diversification may yield lower returns than buying
        individual stocks, stocks, bonds, etc.
         Mutual Funds, Cont’d
 Indexed Stock Market Mutual Funds
   Can minimize management fees by buying into a
    stock market mutual fund pegged to a stock market
    index.
      The mutual Fund mirrors a fixed list / index of stocks such
       as the Standard and Poors 500.
               No need for a manager as changes to the fund occur
                automatically as the index changes.
               Lower management fees.
               You earn “market” returns.
 Bond Market Mutual Funds
 Money Market Funds
   Mutual fund that uses investors’ money to make
    short-term loans to businesses and banks
      Can write checks, but only above a minimum amount such
       as $500.
      Not insured like Money Market deposit accounts.
            Other Investments
 Individual Pension Plans
    Individual Retirement Account (IRA)
       Private retirement plan allows you to save up to $3,000,
        deduct that amount from taxable income, and not pay taxes
        on interest earned until withdrawn after 59 1/2.
    Roth IRA - Do not deduct contributions from taxes, but
     interest earned is tax free.
 Commodities - Gold, Oil, Pork Bellies, Cocoa, Etc.
 Real Estate, Coins, Art, Antiques, Beannie Babies,
  anything that you believe will grow in value over
  time.

								
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