Investing in many things reduces the amount of risk that you are taking when making investments. You may choose to open a savings accoung, invest some money in the stock market and purchase some government bonds.
By doing so, you spread out your investment risk. By investing in many different investments, rather than one, you are ensuring that even if a one investment goes wrong, leaving you with loss or low returns, you will still make money on your overall investments.
Making several different investments as a way of reducing overall risk is called diversification. Investors diversify their investments so that no single loss can harm their financial situation in a serious way.
Saturday, October 29, 2011
Friday, October 28, 2011
Investing - Risk and Reward
Each method of investing and every unique investment comes with its own risk and potential benefits. When you select an investment, make sure that you understand what the risks are as well as what type of investment will work best for your financial situation. Here are several different ways to invest your money:
Savings Account
Certificate of Deposit
Money Market Account
U.S. Bond
Mutual Fund
Stock
Collectibles
Where should you invest your money? You also need to consider the following when investing:
Safety - How risky is the investment? Safety is a measure of risk. A safe investment is one with little risk of losing money. An investment that is not considered safe may have a high likelihood of lsoing some or all of the money that you invest.
Liquidity- How easily can you get your money out of the investment? Can you afford to leave your money in an investment for a long period of time?
Return on investment - How much might your investment earn? Investments with a low rate of return might not make much money. But they also may not cost much to begin with.
Losing at the investment options listed above, collectibles is a risky investment but it could potentially bring a great rate of return. A savings account has very low risk, but it may not bring your a large return.
In order to make higher returns, you may need to invest more, but that may also mean that you risk more. Investments with lower potential returns may earn less, but you're less likely to lose your money. You need to think of each investment as a trade off between risk and reward.
Savings Account
Certificate of Deposit
Money Market Account
U.S. Bond
Mutual Fund
Stock
Collectibles
Where should you invest your money? You also need to consider the following when investing:
Safety - How risky is the investment? Safety is a measure of risk. A safe investment is one with little risk of losing money. An investment that is not considered safe may have a high likelihood of lsoing some or all of the money that you invest.
Liquidity- How easily can you get your money out of the investment? Can you afford to leave your money in an investment for a long period of time?
Return on investment - How much might your investment earn? Investments with a low rate of return might not make much money. But they also may not cost much to begin with.
Losing at the investment options listed above, collectibles is a risky investment but it could potentially bring a great rate of return. A savings account has very low risk, but it may not bring your a large return.
In order to make higher returns, you may need to invest more, but that may also mean that you risk more. Investments with lower potential returns may earn less, but you're less likely to lose your money. You need to think of each investment as a trade off between risk and reward.
What's an Investment
Investments allow you to make money with your money, allowing you to save more money over the long term and build wealth. Depositing money in a bank or credit union, buying stock in a company or buying a bond --- all of these are investments.
Choosing the right kind of investment for you and your money can be challenging. There are so many different types of investments. Each type carries with it unique risks. Some are so risky that they possibly cause you to lose all of the money that you invested, while others may make you very large profits (rewards).
Risk and reward are not the only things to think about when investing. You need to consider how easily it is to take your money out of an investment if you find that you need it or just want to withdraw the investment.
It's important to make investments with the long term in mind, find investments that suit your personal financial situation and understand that different investments have different kinds of return. You need to take all of these considerations into account when selecting investments.
Choosing the right kind of investment for you and your money can be challenging. There are so many different types of investments. Each type carries with it unique risks. Some are so risky that they possibly cause you to lose all of the money that you invested, while others may make you very large profits (rewards).
Risk and reward are not the only things to think about when investing. You need to consider how easily it is to take your money out of an investment if you find that you need it or just want to withdraw the investment.
It's important to make investments with the long term in mind, find investments that suit your personal financial situation and understand that different investments have different kinds of return. You need to take all of these considerations into account when selecting investments.
Thursday, October 27, 2011
Credit Report
Most people finance their homes with mortages and pay for their cars with loans. Students often need loans to pay for college. And a lot more people make purchases with credit cards.
Credit is not given. You have to apply for it. Finance companies will not give you credit unless their know a lot about you. They reply on a credit report.
A credit report is a record of your credit activities. It lists any credit-card accounts or loans you may have, the balances, and how regularly you make your payments. It also shows if any action has been taken against you because of unpaid bills.
A company that gathers and sells credit information is called a consumer reporting agency (CRA). These types of companies collect information about your credit activities, store it in giant databases, and charge a fee for supplying the information. The most common type of CRA is the credit bureau.
There are three major credit bureaus that operate nationwide: Equifax, Experian, Trans Union. Plus many smaller companies serving local markets.
Your credit rating is drawn from your credit report, which outlines your borrowing, charging, and repayment activities. A good rating helps you reach financial goals; a poor rating limits your financial opportunities.
Since your credit report influences whether you are able to buy a home and get a job, it is extremely important to protect your credit rating by making loan and bill payments on time and by not taking on more debt than you can handle.
Check your credit for free at Annual Credit Report.
Credit is not given. You have to apply for it. Finance companies will not give you credit unless their know a lot about you. They reply on a credit report.
A credit report is a record of your credit activities. It lists any credit-card accounts or loans you may have, the balances, and how regularly you make your payments. It also shows if any action has been taken against you because of unpaid bills.
A company that gathers and sells credit information is called a consumer reporting agency (CRA). These types of companies collect information about your credit activities, store it in giant databases, and charge a fee for supplying the information. The most common type of CRA is the credit bureau.
There are three major credit bureaus that operate nationwide: Equifax, Experian, Trans Union. Plus many smaller companies serving local markets.
Your credit rating is drawn from your credit report, which outlines your borrowing, charging, and repayment activities. A good rating helps you reach financial goals; a poor rating limits your financial opportunities.
Since your credit report influences whether you are able to buy a home and get a job, it is extremely important to protect your credit rating by making loan and bill payments on time and by not taking on more debt than you can handle.
Check your credit for free at Annual Credit Report.
Wednesday, October 26, 2011
Credit Cards
The word "credit" come from the Latin word "creditus" which means trust. Why should anyone trust a thin piece of plastic?
That's what credit cards are...just a thin piece of plastic with a magnetic strips. The trust lies in the information contained into the strip; it identifies who the card belongs to and the status of their credit.
When someone uses a credit card to make a purchase, the seller runs the card through a machine that reads the magnetic strip. If the person's credit account is "good", then the transaction goes through.
You must apply for a credit card through a bank, credit union or other company. You must be at least 18 years old and not have "bad" credit. It's a lot easier to have "bad" credit than you think. It can occur by making late payments on your credit card or other bills or just having too much debt.
A credit card allows you to buy things now and pay for them later. It's kind of like taking out a short term loan. They are very handy in emergencies, when you need money fast or when you just don't have cash on hand.
A credit card has a spending limit. You cannot spend more on the credit card than the limit. For example, if your limit is $5,000, then you cannot spend more than $5,000 on that credit card within the cycle --- usually 20 to 30 days.
Financial instutions and companies make more on credit cards by charging finance fees. They might charge an annual fee for the card, late fees and some charge is the card is not payed off each month.
Credit cards work best for people who stay within their budgets and pay off their credit card account each monthy so that they avoid finance charges.
That's what credit cards are...just a thin piece of plastic with a magnetic strips. The trust lies in the information contained into the strip; it identifies who the card belongs to and the status of their credit.
When someone uses a credit card to make a purchase, the seller runs the card through a machine that reads the magnetic strip. If the person's credit account is "good", then the transaction goes through.
You must apply for a credit card through a bank, credit union or other company. You must be at least 18 years old and not have "bad" credit. It's a lot easier to have "bad" credit than you think. It can occur by making late payments on your credit card or other bills or just having too much debt.
A credit card allows you to buy things now and pay for them later. It's kind of like taking out a short term loan. They are very handy in emergencies, when you need money fast or when you just don't have cash on hand.
A credit card has a spending limit. You cannot spend more on the credit card than the limit. For example, if your limit is $5,000, then you cannot spend more than $5,000 on that credit card within the cycle --- usually 20 to 30 days.
Financial instutions and companies make more on credit cards by charging finance fees. They might charge an annual fee for the card, late fees and some charge is the card is not payed off each month.
Credit cards work best for people who stay within their budgets and pay off their credit card account each monthy so that they avoid finance charges.
Monday, October 24, 2011
Savings Accounts
A savings account helps keep your money safe. The most common types of savings accounts are called passbook or statement accounts.
Interest is the key to how your savings grows. It's the fee that the financial instution pays you for keeping your money in a savings account. That's right! You earn this money.
There are other types of savings accounts:
Interest is the key to how your savings grows. It's the fee that the financial instution pays you for keeping your money in a savings account. That's right! You earn this money.
There are other types of savings accounts:
- Money Market Accounts - pays you interest and allows you to write a certain number of checks each month. You must keep a minimum balance.
- Certificates of Deposit - pays more interest than a Money Market Account. But you must keep your money in the CD for a set time period.
- Individual Retirement Account - Pays you interest that is not taxed until you retire.
- Education IRA - It allows you or your parents to put away money for your colleged education. Interest is not taxed if the money is used to pay for college.
Keep reading to learn more!
Wednesday, October 19, 2011
What's a Check?
A check allows you to spend money without carrying around cash. It's basically an order telling your bank or credit union to pay someone a certain amount of money using the funds that are in your checking account.
Checks are the second more popular way to buy things. Number one is cash. Checks give you a record that you can keep. You get a monthly statement from the bank or credit union that lets you see how much, when and with whom you spent your money.
Some checking accounts offer interest, just like savings accounts. All checks have a routing number at the bottome which identifies the bank from which it came. They all also have a "pay to the order of " .
There are millions of checking accounts in the United States today. Do you have one?
Checks are the second more popular way to buy things. Number one is cash. Checks give you a record that you can keep. You get a monthly statement from the bank or credit union that lets you see how much, when and with whom you spent your money.
Some checking accounts offer interest, just like savings accounts. All checks have a routing number at the bottome which identifies the bank from which it came. They all also have a "pay to the order of " .
There are millions of checking accounts in the United States today. Do you have one?
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