Each of us, have several options, and alternatives, when it comes to our decisions, regarding, choosing how we invest our monies, and, why we choose, one vehicle, over another! Although, there are quite a number of possibilities, the most – often, used, are: the bank; US Treasury obligations; Municipal Bonds; Corporate Bonds; and, Mutual funds/ Individual stocks. The purpose of this article is not to provide investment advice, but, rather, to attempt to clarify, the differences, possibilities, etc. It’s your hard – earned money, so the more you know, and understand, the better, you might be capable of, making the wisest, personal decisions. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, these 5 choices, and the most, significant impacts.
1. Bank: Some feel most comfortable, putting their funds, in the bank, for a number of reasons. One of the most significant is, their personal comfort zone, as well as convenience, etc! Although, the protections and insurance, banks offer, make it safe, it also, usually, translates to a relatively, low, rate of return, etc. Although,we currently, exist, in a very low – interest, financial environment, and relatively – low, inflation, historically, bank returns, are, nearly, always, lower, than the cost of living, etc!
2. US Treasury obligations: The United States Treasury depends on a variety of debt obligations, with various limitations, due dates, terms, etc. They are usually distinguished, between, bills, and bonds, and, are considered the safest – possible investment vehicles. Obviously, because of this, they generally pay lower interest/ dividend rates, than corresponding, corporate, and municipal, bonds, etc.
3. Municipal Bonds: When municipalities, such as cities, states, and various municipal agencies, etc, need to borrow funds, they generally rely on using, Municipal Bonds. When, one invests in a Municipal Bond, which is from the state, you reside and pay taxes, in, the interest received, is tax – free. Depending on one’s tax level/ rate, and how, he handles risks, etc, as well as the corresponding rate, paid, by both corporate, versus, municipal obligations, these may make sense, for some!
4. Corporate Bonds: When corporations borrow funds, they, often, offer Corporate Bonds, as their financing vehicle. These are, often, rated, based on the overall, financial picture, of the company! Some of these, are backed – up, by the full faith, and earnings/ assets, of the corporation, while some, are only covered by, a specific project, etc. Depending on rating, terms, type, length, quality, etc, the coupon – rate, is determined! These payments are taxable, and, may make sense, or not, dependent on one’s circumstances, needs, etc.
5. Mutual Funds/ individual stocks: One may, also, decide to invest in a variety of individual stocks, or, discover, investing in a Mutual Fund, makes more sense, for him. Remember, there are never, guarantees, when investing in stocks, etc, but, they, sometimes, offer, more potential, etc. A mutual fund, is a managed group of stocks, bonds, etc, with a specific purpose, etc. There are several reliable organizations, who evaluate and consider, a variety of factors, and, then, rate them!
The more, one knows, and understands, about, the options, and alternatives, the better, he becomes, capable, of proceeding, in a wise, prudent, well – informed manner, which makes sense, to him! These 5 approaches, are simply, the tip – of – the – iceberg, and the more you know, the better prepared, you might be!