Selecting Your Investments
Investing your money will give you the chance to increase its value over time. There are many types of investments to consider. Here are the basics.
Stocks
A stock is certificate of ownership for a small part of a company. It is referred to as an equity position. A share of stock is publicly traded on a stock exchange. This makes it easy to buy or sell stock.
The value of stock tends to go up and down, depending on the earnings of the company and the strength of the stock market. Stocks are risky because the value might be down when you plan to sell them.
On the other hand, the value of stock has the chance to increase greatly in value. This opportunity for growth offers the chance for a greater return on investment than bonds.
Bonds
A bond is a loan to the company. In turn they pay you interest on the money that you loan to them. Bonds are bought or sold through investment companies.
They have a date when the amount of the loan is repaid. This is the maturity date. Because the loan amount is paid back, bonds are considered less risky than stocks.
Sometimes bonds are sold before they mature. If the interest rate in the market changes, the value of the bond may change. It will go down when interest rates rise. When rates go down, the value of the bond will go up.
Money Market
The term Money Market refers to an investment that is very short term. It will be a government or corporate debt. It carries little risk, because it can be always be withdrawn for the amount that was invested.
Money Markets do not offer any protection against inflation and the return on investment is very low. They are a good place to place your money when you are deciding the best plan for your long-term investment plan.
