Page 82 - Workbook3E

• Municipal Securities: These are tax-exempt bonds offered by municipalities and states. Usually they carry lower yields than taxable bonds. They’re rated as to quality, much as with corporate bonds, and their value may fluctuate too. Such bonds provide little or no tax benefits to lower-tax-bracket investors, but may assist you if you’re in a high tax bracket.
• Savings Plans: Such plans include savings accounts, certificates of deposit (CDs), money market accounts, and interest paying checking accounts.
• Money Market Mutual Funds: These funds are investor “pools” that invest in a variety of investments, such as those listed above. Most of these funds are not insured, and their yields can fluctuate daily. Many have “check-writing” privileges.
• Annuities: An Annuity is a contract sold by a financial institution or insurance company guaranteeing the buyer a fixed income
from the contract for a certain period of time, often for life. Such investments provide a steady income and freedom from managing your investment capital.
2. Equity—The second way to put money to work is creating asset equity by buying something with value or equity. You hope to sell what you buy for more money than you paid for it. Also, what you buy may generate income—such as dividends from stocks or rental income from property. Here are examples of equity buying:
• Stocks: When you buy stock in a company, you’re buying a piece or “share” of ownership in the company. Your equity value increases or decreases as the price of shares rise or fall—depending on the profitability of the company. Other factors may affect the price also.
• Mutual Funds: These funds allow you to diversify your stock investment. You’re able to buy shares in a profes- sionally managed fund, which invests in various kinds of securities. The funds are high, medium, or low-risk.
• Own your own Real Estate: You can invest on your own in real estate, or as a member of a syndicate or investment group. Any real estate venture involves risk; so it’s wise to consult with experts at each stage of the investment process.
• Commodities, Metals, Gems, and Collectibles. These investments are very speculative and have the potential
for great loss as well as gain. It’s like placing a “bet” on the future value of your investment: things like pork bellies, corn, precious metals, and foreign currency. Your money earns no interest, dividends, or rent from such investments. And the return depends entirely on the value of the investment at the time of sale.
“Most people are too busy earning a living to make any money.”
~ Anonymous
“I really don’t care about my job anymore... I just can’t afford to quit.”
78 Workbook 3: Prepare for the Future