Saving and Investing

Bonds A Bond is an IOU issued by a corporation or by the government as a way for them to borrow money. When you purchase a bond, you buy the right to receive a fixed amount of money at some future date as well as an annual interest payment. The face value of the bond is the fixed amount agreed upon.

Bonds Corporate Bonds can be risky, depending on the financial health of the firm. If the firm goes bankrupt, it won't be able to pay what it owes you. Government bonds are more secure because the government is unlikely to declare bankruptcy. Government bonds can be purchased through banks and are available in small denominations. Although the return is low compared to other types of investments, the risks are low.

Stocks Stocks are a popular form of investment. Stocks represent ownership in an organization.

Dividends Two potential benefits from owning stock are dividends and capital gains. Dividends are portions of a corporation’s profit paid to stockholders. A Capital Gain is the profit you make if you can sell your stock for more than you paid for it. Not all stocks pay dividends. Some companies reinvest their profits, rather than pay our dividends.

Stocks Preferred Stocks – earn dividends fixed at an annual rate Common Stocks – are dependent on market fluctuations. Some investors rely on the services of a stockbroker to purchase stock. You will want to compare reputations, transaction fees, insurance and services of various brokerage firms before you choose one.

Stocks Many people rely on the advice of a professional financial advisor or investment advisor when choosing stock Make sure you check an advisor’s credentials

Stocks Stocks are riskier than bonds, because stock price is based on the expectation of profit If the firm turns out to be less profitable than expected, dividends will be smaller than expected and the market price of shares may decrease You may find yourself selling shares for less money than you paid for them. Experts warn that if you get into the stock market, you should be prepared to ride the ups and downs of the market.

Mutual Funds Mutual Funds are an investment in an investment company. Investment companies sell stock in their mutual funds Instead of producing a product or service, they take the money they receive for their stock and invest it in the stocks and bonds of other corporations. Mutual funds combine money received from investors to make substantial investment in other companies

Mutual Funds Benefit of Mutual Funds is that they provide instant diversification to your portfolio. This means that the money you invest in a mutual fund is spread out among all the different companies in which the mutual fund invests its money Mutual Funds include stocks of varying risk levels.

Mutual Funds Money market funds – short-term, low risk investments. The money you invest will be used to make short-term loans to businesses or the government (not the same as money market deposit accounts)

Saving and Investing Bond Funds – Investments in bonds. They usually have higher potential yields than money market funds, but they are also riskier. Stock Funds – Though riskier, they offer the highest potential returns. As long-term investments, they perform better than money market funds and bond funds