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| Savings and Investment Options |
| 05.13.08 (2:41 am) [edit] |
| Where you put your money depends on a multitude of circumstances related to your own individual needs and desires as well as the state of the economy. Regardless of your savings and investment choices, you face three kinds of risk: interest rate risk (value of your investment changes as interest rates rise and fall); inflation risk (inflation diminishes the return on your investment); price risk (the actual value of your investment may go down). Listed below are a few savings and investment options and a brief description: Passbook Accounts - Most of us are introduced to the world of finance with a passbook savings account from our local bank. Advantages: No risk; federally insured; convenient. Disadvantages: Low interest rates; possible fees for low balances. Bank Money-Market Accounts - These accounts pay a variable rate of interest and the banks set the rates. There can be a rule on how much you have to withdraw at one time and how many withdrawals you can make by check per month. Advantage: In high-interest periods, it usually pays more than passbook accounts; easy to open; convenient access; federally insured; combined bank balances (checking plus passbook plus money market) may get you a free checking account. Disadvantages: In low interest-rate periods, it pays about the same as a passbook account; monthly fees if your account falls below the required minimum balance. Mutual Fund Money-Market Accounts - In this case money is pooled by a number of investors into a mutual fund that buys short-term securities like Treasury securities, high-quality bank certificates of deposit, etc. These are considered safe (some buy only U.S Government securities), and you can write an unlimited number of checks on the fund. Advantages: Higher short-term returns than with bank money-market accounts; liquid; diverse investments. Disadvantages: Don't have federal deposit insurance; management fees. Certificates of Deposit (CDs) - You deposit money (usually in a bank, savings-and-loan, or credit union) for a specified period at a specified interest rate. Your principal never fluctuates. Advantages: Interest rates usually higher than money-market accounts or passbook accounts; federally insured. Disadvantages: Penalty for early withdrawal. U.S Treasury Bills - You loan money to U.S. Government when you buy a Treasury bill - or the other two Treasury securities listed below (Treasury notes, Treasury bonds). Treasury bills are short-term obligations that mature in three months, six months, or a year. They do not have a stated interest rate; you buy them at a discounted rate and your profit (interest) is the difference between what you pay and the face value when the T-bill matures. Minimum investment is $10,000. Advantages: Extremely safe; short maturities; exempt from state and local taxes; can buy directly from a Federal Reserve Bank. Disadvantages: High minimum investment; no interest payments; interest rates are usually lower than with longer-term investments INVESTMENT Within the investment world there are a variety of investment programs to place your money into. Many of these will give excellent results over the longer term and have been in operation for many years. A program is just another word for an establish method of investing. Investment programs are usually put together by companies that have an interest in varied investment vehicles but can also devote their time and effort to a particular type of investment. Some programs also involve government participation and guarantee. When looking for investment ideas, look to the historical performance of the managers and evaluate the previous results of their efforts. Such programs will often encourage investors to join management in applying their capitol to partly funded enterprises that require further asset development or project redevelopment. Investments are all detailed in the accompanying prospectus's and can offer very good returns under capitol guarantee. Some opportunities may involve local participation in community developments and are for the purpose of community development projects. These can be run by investor groups or local government. Developers of property often raise funds through structures that invite several investors to participate. These types of investment structures are often closed to general investors although expressions of interest may be sort by the average investor. When researching this type of investment always look at the legal requirements behind the investment offer. Most investment offers that give shares or part rights in the investment have to past the scrutiny of the Australian Security and Investment Commission. These investments will also require legal documentation to be signed. Have the appropriate legal sources evaluate the documents and check for any fine print. Search the various financial media for these investment types and visit web pages that offer information on investing. It is important to do your homework before entering into this type of investment |