Finance

You hear of many different types of investments, from mutual funds to unit trusts. But they are all derived from three basic asset categories: Cash The great advantage of cash and cash equivalents is that funds are readily accessible, or liquid. Cash equivalents also maintain a high degree of liquidity, but allow you the potential…

A mutual fund is an investment company that pools money from shareholders to invest in a diversified portfolio of securities. When an investor puts money into a mutual fund, the investor is purchasing shares of that fund. Each share represents proportionate ownership in the fund’s underlying securities. Mutual funds are managed by professionals who employ…

Investor sentiment can be a double-edged sword. On the one hand, strong enthusiasm on the part of investors has helped propel the equities market to unprecedented highs. On the other hand, a sudden shift in sentiment can cause an equally sudden shift in the market’s performance. Volatility is inevitable. How can you prepare for it?…

In order to reach your financial objectives, you must choose from diverse investment alternatives-all of which vary greatly in the degree and type of risk and potential return. The key to developing a sound portfolio is to strike the right balance between potential reward and risk, based on your financial objectives, financial situation and investment…

Shares of stock represent ownership in a corporation. Stocks fall under many categories, depending on the size of the company, its prospects and the state of the markets. Types of Stocks Stocks in companies whose sales and/or earnings are growing, or are expected to grow, more rapidly than other companies in the same industry or…

Bonds are debt instruments issued by a company or government entity to finance a certain aspect of its operation. When you invest in bonds, you are essentially lending money to the bond issuer, entitling you to receive interest on that loan. The interest rate, set when the bond is issued, is known as the bond’s…

Inflation is the persistent increase in the cost of goods and services. It’s the main reason why a nickel won’t get you in to see a movie anymore. The Consumer Price Index (CPI), the most popular measure for inflation, states the rise or decline (deflation) in costs as a yearly percentage. For your purchasing power…

CDs are savings vehicles that offer set interest rates for a fixed period of time. You make a one-time investment and earn interest until the CD’s term is up and the principal is returned; there are usually penalties for early withdrawals. Your investment is insured by the FDIC (Federal Deposit Insurance Corporation) for up to…

The main challenge you face as an investor is earning the return you want while managing the risk involved. Here’s where diversification is crucial. Keeping a diverse portfolio means spreading your investments among different classes of assets (e.g., stocks, bonds and cash equivalents), so that they work together to build your wealth, while affording you…