Investing
If you are conducting a career job search, investing is one of the best ways to accrue a large income in a short period of time. Asset Management can also be challenging if you do not know what you are doing; in this article I will cover different types of investments and different ways of investing.
As I said before, investing is one of the quickest ways of accumulating wealth and it can be very easy once you know how. If you are a beginner at investing the best way to get your feet wet is to invest in your 401k at your or an IRA. A 401k and IRA are very similar with one difference:
1. A 401k is something that your job may offer as a benefit, your employer may use part of your salary to put into your 401k or they will match 50% of what you invest.
2. An IRA on the other hand is an account that you open on your own and contribute your own funds
Both investments are retirement plans and the government regulates how much you can put in both plans and penalties if you withdraw from your accounts before age 591/2. Unlike some of the other investments, the individual can regulate these types of plans themselves and distribute percentages of the money into different funds.
Mutual funds are another fund you can invest in. A mutual fund is an investment that is a collection of money from many investors that is managed by a professional. The fund manager invests the money into different stocks, bonds, short-term money market instruments and other securities. The fund manager (or portfolio manager) determines the funds capital gains and possible losses and collects the dividends (aka interest income) and distribute the proceeds to the individual investors. It's a good way for a person with less than one thousand dollars to invest in just about anything. When investing in mutual funds, there is a level of risk, so beware.
Stocks can be directly invested in if you have the right amount of money. A stock is a share of ownership in a corporation, the more shares you buy, the larger the percentage of a corporations you own. There are two types of stock:
1. Common Stock- a unit of ownership that typically carries voting rights that can be a determinant in corporate decisions.
2. Preferred Stock- unlike common stock the shareholder does not have voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.
Investing in stocks directly can be a very high risk but with high risk, there is also a great chance for a higher return.
Bonds are another form of investments. A bond is debt security, which means a person loans a company money and in return the issuer (borrower) pays the bond holder (lender) the principal (what was borrowed) plus interest (known as a coupon) after a period of years (maturity). A lot of grandparents tend to buy their grandchildren savings bonds. There are two types of bonds that can be purchased today: Series EE and Series I. A Series EE bond has a 30-year term and is paid in a lump sum at the time of redemption, at one time it had a variable rate but as of May 1, 2005 it now has a fixed rate. The rate of the bond depends on when it was bought. A Series I bond on the other hand has a combination rate which means it has a fixed rate and an inflation premium. The inflation premium is adjusted every May and November by the Treasury Department but the fixed rate is good for as long as you hold the bond. Retirement plans, mutual funds, stocks and bonds are only a few of the investing funds you can put your money in, for more you can contact a brokerage firm or do research online and read investment literature.
There are different methods of investing; investing online for instance is becoming more popular as time goes by. Everyday more people are beginning to take an active role in there investments which is a good thing. The days of trusting a "professional" to look after your investment is starting to fade away, especially since a lot of people have lost large amounts of money over the years and lets not forget the commission fees. There are still some individuals that would rather let a broker take care of their portfolio because they do not have the time or patience to do it themselves. Regardless to which method you choose to use, you should still play an active role in where your money goes.