Understand 5 investment possibilities and options
Each of us has several options and alternatives when it comes to our decisions, regarding choosing how we invest our money and why we chose one vehicle over another. Although there are many possibilities, the most used are: the bank; United States 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 you’ll be able to make the wisest personal decisions. With that in mind, this article will briefly attempt to consider, examine, review, and discuss these 5 options and their most significant impacts.
1. Bank: Some feel more comfortable putting their funds in the bank for various reasons. One of the most significant is your personal comfort zone, as well as convenience, etc.! Although the protections and insurance offered by banks make it safe, it also usually translates into a relatively low rate of return, etc. Although we currently exist in a financial environment of very low interest and relatively low inflation, historically, bank returns are almost always lower than the cost of living, etc.
2. US Treasury Bonds: The United States Treasury relies on a variety of debt obligations, with various limitations, maturity dates, terms, etc. They are generally distinguished between bills and bonds, and are considered the safest possible investment vehicles. Obviously, because of this, they generally pay lower interest/dividend rates than the corresponding bonds, corporate, municipal, etc.
3. municipal bonds: When municipalities such as cities, states and various municipal agencies etc. need to borrow funds, they generally rely on the use of Municipal Bonds. When one invests in a Municipal Bond, which belongs to the State, resides and is taxed, in it, the interest received is tax free. Depending on one’s tax level/rate, and how one manages risks etc., as well as the corresponding rate, paid, for both corporate and municipal obligations, this may make sense to some!
4. Corporate bonds: When corporations borrow funds, they often offer Corporate Bonds as their financing vehicle. These are often qualified, based on the company’s overall financial picture. Some of these are backed by the full faith and earnings/assets of the corporation, while others are only covered by a specific project, etc. Depending on the rating, terms, type, duration, quality, etc., the coupon rate is determined! These payments are taxable and may or may not make sense, depending on circumstances, needs, etc.
5. Mutual Funds/Individual Stocks: One may, too, decide to invest in a variety of individual stocks or, he discovers, investing in a mutual fund makes more sense to him. Remember, 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, with a specific purpose, etc. There are several reputable organizations that test and consider a variety of factors and then rate them!
The more one knows and understands about options and alternatives, the better one becomes, capable of proceeding in a wise, prudent, well-informed manner that makes sense to him! These 5 approaches are just the tip of the iceberg, and the more you know, the better prepared you’ll be.