Each of us has many options and alternatives, regarding our decisions, regarding, the choice of how we invest our money and why we choose one vehicle over another! Although there are a number of possibilities, the most often used are: banking; US Treasury bonds; Municipal bonds; Corporate bonds; and, mutual funds / individual stocks. The purpose of this article is not to provide investment advice, but rather to try to clarify the differences, possibilities, etc. It’s your hard earned money, so the more you know and understand, the better off you’ll be. able to make the wisest personal decisions. With that in mind, this article will attempt, briefly, to examine, examine, review and discuss these 5 choices and the most significant impacts.
1. Bank: Some people feel more comfortable putting their funds in the bank for a number of reasons. One of the most important is their personal comfort zone, as well as convenience, etc. Although the protections and insurance offered by the banks make it safe, it also usually results in a relatively low rate of return etc. Although we exist now, in a very low interest rate and relatively low financial environment, inflation historically bank yields are almost always below the cost of living etc!
2. US Treasury Bonds: The United States Treasury is dependent on a variety of debt securities, with various limitations, maturity dates, conditions, and more. They are generally distinguished between bills and bonds, and are considered the safest possible investment vehicles. Obviously, because of this, they usually pay lower interest / dividend rates than corresponding bonds, corporate and municipal bonds, etc.
3. Municipal bonds: When municipalities, such as cities, states and various municipal agencies, etc., need to borrow funds, they usually rely on the use of municipal bonds. When you invest in a municipal bond, which comes from the state, you reside and pay taxes, the interest collected is exempt from tax. Depending on its tax level / rate, and how, it manages risk, etc., as well as the corresponding rate, paid, both by corporate bonds, against municipal bonds, this may make sense, for some!
4. Corporate bonds: When companies borrow money, they often offer corporate bonds as a financing vehicle. These are often noted on the basis of the overall financial situation of the company! Some of them are backed by full faith and company profits / assets, while others are only covered by a specific project etc. Depending on rating, conditions, type, duration, quality, etc. , the coupon – rate, is determined! These payments are taxable and may or may not make sense, depending on the situation, needs, etc.
5. Mutual funds / individual stocks: One can, also, decide to invest in a variety of individual stocks, or, find out, investing in a mutual fund, makes more sense, for him. Keep in mind that there are never any guarantees when investing in stocks etc., but sometimes they offer more potential etc. A mutual fund is a managed group of stocks, bonds, etc., for a specific purpose, etc. There are several reliable organizations out there that assess and consider a variety of factors and then rate them!
The more we know and understand the options and alternatives, the better we become, able, to proceed, in a wise, prudent, well-informed manner, which makes sense for him! These 5 approaches are just the tip of the iceberg, and the more you know, the better prepared you will be!