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| Articles Written By Robert Ruiz |
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Pros And Cons of Different Types Of Investments
When deciding where to invest your money, you need to always take into
account your investment goals and objectives. Different types of investments
carry varying degrees of risks and potential return.
CD
A bank CD is a very safe investment. The CD is FDIC insured up to
$100,000, so there truly is minimal risk. The only downside is that you cannot
withdraw that money in the CD for a specific amount of time or else you'll
receive a penalty. Bank CDs generally only pay up to 5% interest.
Bonds
A bond is essentially a loan you make to a company or a government.
Bonds have varying degrees of risk, from essentially risk-free treasuries to junk
bonds. The higher the risk of the bond, the higher the return will generally be.
Stocks
Stocks are investments in companies. Depending on the company, the risk of
the investment can be high or low. Obviously, buying stock in Johnson and
Johnson is a lot less risky than a new internet startup company. In general, the
stock market returns on average about 10% a year, though the actual return of
any given stock will vary significantly.
Mutual Funds
A mutual fund typically invests in over 100 stocks, so it's an instant way to
diversify your portfolio. However, the mutual fund generally charges a fee, which
is about 1% of your assets per year. Because of this fee, most mutual funds do
not outperform the market; a monkey blindly picking 100 stocks but not
charging you a fee could easily outperform most mutual funds.
Real Estate
Real estate is a popular investment. The most obvious real estate investment
you'll make is when you purchase your home. Your home can go up or down in
value when you sell it; it depends on the housing market in your area.
When deciding where to invest your money, you need to always take into
account your investment goals and objectives. Different types of investments
carry varying degrees of risks and potential return.
CD
A bank CD is a very safe investment. The CD is FDIC insured up to
$100,000, so there truly is minimal risk. The only downside is that you cannot
withdraw that money in the CD for a specific amount of time or else you'll
receive a penalty. Bank CDs generally only pay up to 5% interest.
Bonds
A bond is essentially a loan you make to a company or a government.
Bonds have varying degrees of risk, from essentially risk-free treasuries to junk
bonds. The higher the risk of the bond, the higher the return will generally be.
Stocks
Stocks are investments in companies. Depending on the company, the risk of
the investment can be high or low. Obviously, buying stock in Johnson and
Johnson is a lot less risky than a new internet startup company. In general, the
stock market returns on average about 10% a year, though the actual return of
any given stock will vary significantly.
Mutual Funds
A mutual fund typically invests in over 100 stocks, so it's an instant way to
diversify your portfolio. However, the mutual fund generally charges a fee, which
is about 1% of your assets per year. Because of this fee, most mutual funds do
not outperform the market; a monkey blindly picking 100 stocks but not
charging you a fee could easily outperform most mutual funds.
Real Estate
Real estate is a popular investment. The most obvious real estate investment
you'll make is when you purchase your home. Your home can go up or down in
value when you sell it; it depends on the housing market in your area.