Tuesday, December 31, 2019

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Financial Investments

Using Financial Investments to Improve your Finances

Making a financial investment can be a lucrative way to allow your finances work for you. If you have finances lying around why not invest. Investing your hard-earned cash can definitely be rewarding, but keep in mind it will require a wise investment.

As an investor, the ultimate goal is choosing an investment that yields a high return on investment (ROI) in a timely manner. In other words, most investors would prefer seeing their return sooner rather than later.

Nevertheless, investments that yield high returns fast are typically considered to be those of a high risk. This leaves an investor with a tough decision to make: choose an investment that yields a faster (ROI) which is risky, or choose the long term investment which is not as risky, but it takes longer for a (ROI).

Investors who are looking for returns that are not as risky, long term investing is the safest option. On the other hand, a higher risk can yield a faster return, but you also take the chance of rolling the dice.

3 Main Ways to Financially Invest

In the old days, only one source was needed of income to pay a home mortgage. During these times, the husband was the main source of income: the wife would stay at home, raising kids, cooking and cleaning.

Fast forwarding to the 20th century mortgage payments are much higher, it generally takes two sources of income to pay a mortgage. In order to live comfortably, people need alternatives ways to generate revenue in the world we live in now. Given these points, financially investing your finances could be the extra source of income that secures you financial situation.

The 3 main ways to financially invest are stocks bonds and cash equivalents. A majority of individuals invest in both stocks and bonds. Whereas mainly businesses invest in cash equivalents. However, if you adequately invest, either investing in any of the following will help grow your bank account.

Stocks

Stocks are by far the most popular of the three financial investments. When you purchase stock options it can be rewarding as well as unrewarding, it all depends on the entity that you invest in. These days people don't need to go to Wall Street to purchase stock options, stock can be purchased online.

By purchasing a company's stock, you're buying a percentage of the company which is called a share.
The value of every company fluctuate on a daily basis. Some companies values may rise for a month, then decline. Whereas other companies may decline for a month, then rise. As an investor, you never know what's going to happen. However, if you stay committed to learning and researching information pertaining to the company you invest in. You can increase your chances of staying ahead of the curve.

Components of stocks
  • Growth stocks
  • Yield stocks
  • New issues
  • Defensive stocks

Bonds


A bond investment is the action of loaning the government or a corporation money that is paid back with interest. Typically bonds are issued to the public when the government or corporations need to borrow money. Many investors choose this market for one reason, the market yields over $43 trillion fluctuating dollars.

Generally speaking, people think bonds are safer than stocks. However, you must consider the credit quality of the asset you're doing business with. For instance, a government IOU will most likely have great credit worthiness. Whereas an independent credit agency could pose a risk of default. In other words, you would not get paid the interest on time. Therefore, it's important to research the credit quality of the asset that issues the bond.

Components of bonds
  • Federal government bonds
  • Treasury bonds
  • Zero-coupon bond
  • Municipal bonds

Cash equivalents

Cash equivalents are less risky short term investments that can be converted to cash fairly quick. An investment is considered to be cash equivalent when it is highly liquidated and has a short maturity of 3 months or less.

Components of cash equivalents
  • Treasury bills
  • Commercial paper
  • Marketable securities
  • Money market funds
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