Understanding Investment Choices
The first time Tiger Woods grabbed a golf club he couldn’t hit the ball perfectly straight 300 yards and the first time Michael Jordan touched a basketball he couldn’t dunk it, so don’t think that you will be able to earn a 100% return in the first year. Before Tiger could swing a club, he had to learn which end of the club to hold, and how to hold it. When learning any new skill, you must begin understanding some of the tools and terms involved. Without this basic knowledge, it is difficult – if not impossible – to practice your new skill properly. As you navigate through this investing course, you will become a knowledgeable and smarter investor. This first lesson covers the primary tools you will use to empower yourself to become more financially successful.
Once you become comfortable with these tools and understand what each can accomplish – and what they cannot – you will begin an exciting journey toward financial security. As with most journeys, you will encounter some twists, turns, and detours. With your newfound knowledge, however, you should navigate successfully during both sunny and pleasant periods and during stormy conditions.
Bank and Credit Union Products
So, you just got your year-end bonus of $2,000. Now, what are you going to do with it? Let’sreview the obvious choices, Most financial institutions, banks, credit unions, mutual savings banks, and savings and loan associations have a similar menu of investment products from which you may choose. Here are the most common and popular products:
Savings Accounts
The benefit of a savings account is that you can make deposits and withdrawals whenever you want, no questions asked. Plus, your deposit is protected by the full faith and credit of the U.S. government. If the bank ever goes belly-up, the Federal Deposit Insurance Corporation (FDIC ), which is a branch of the U.S. Government, will guarantee your money up to $250,000 per person, per bank account. And in 2009, the FDIC has been very busy protecting the deposits for people in about 100 banks that went bankrupt!
From bank to bank, savings accounts are all basically the same, but you need to pay close attention to the fine print. The typical differentiators are:
• Interest rate
• Frequency of interest (earnings) posting periods
• Different minimum balance accounts that pay higher interest rates if you maintain the minimum amount on deposit
• Fees for withdrawals, statements, etc.
Certificates of Deposit (CDs)
You agree to deposit a specific amount of money for a fixed period of time called the maturity. In return, your financial institution agrees to pay you interest, usually higher than regular savings accounts, over this period. However, you will have limited opportunities to access these funds, so only use CD s for cash you don’t anticipate needing until after your CD matures. Should you need some or all of your money in CD s, you can withdraw it, but you will pay a substantial penalty, often forfeiting all the interest you have earned since you purchased the CD. There are several different terms for CD s: 3 months, 1 year, 2 years, 5 years,even 10 years. Generally, the longer the term of the CD, the greater return on your money. However, there is a catch: you risk interest rates going up when you buy a longer term. When you buy a CD, you are locked into that interest rate for the life of the CD. If you take out your money before the full term, the bank will charge you a substantial penalty as we mentioned before, so you can’t just sell a CD and then buy a new one with a higher interest rate if your current CD has a lower yield.
On the flip side, you are practically guaranteed a fixed rate of interest on your money for the complete term of that CD. In an era of high inflation rates, CD s are an excellent investment. The last time there were high interest rates in the U.S. was the 1980s, when rates of return on CD s were in the mid-to-high teens! Now, however, interest rates for CD s are very low: 2 percent for a one-year CD and just 3 percent for a 5-year CD.
Whether you have $100 or $10,000,000 in savings, we believe that you should have a basic understanding of how the stock market works. You should know how to manage your own money ,so that you can control your financial future. If you’re paying others to manage your money, now you can learn to do it yourself — it’s not as difficult as you might think. It’s a fact that most brokers and money managers can’t outperform the market. They pay themselves and their secretaries and their marketing expenses first, and then the investors get to share whatever profits are left. Learn to manage your money yourself, and you’re already ahead because you don’t have a broker or money manager’s expenses! Investing 101 will teach you about the different investment choices available to you, how the stock market works, how to evaluate stocks, and how to build and manage a well balanced portfolio. Before we jump in, please understand that this course is not about getting rich quick; this course is about getting rich slowly. Successful investing requires constant education and a disciplined approach. The goal is to grow rich over a lifetime of savings and prudent investing decisions, so please resist offers from so-called investment gurus who promise to make you a million dollars in the next year. We will show you how money and wealth are really generated; by carefully investing over time, and by balancing risk with potential returns.
Once you become comfortable with these tools and understand what each can accomplish – and what they cannot – you will begin an exciting journey toward financial security. As with most journeys, you will encounter some twists, turns, and detours. With your newfound knowledge, however, you should navigate successfully during both sunny and pleasant periods and during stormy conditions.
Bank and Credit Union Products
So, you just got your year-end bonus of $2,000. Now, what are you going to do with it? Let’sreview the obvious choices, Most financial institutions, banks, credit unions, mutual savings banks, and savings and loan associations have a similar menu of investment products from which you may choose. Here are the most common and popular products:
Savings Accounts
The benefit of a savings account is that you can make deposits and withdrawals whenever you want, no questions asked. Plus, your deposit is protected by the full faith and credit of the U.S. government. If the bank ever goes belly-up, the Federal Deposit Insurance Corporation (FDIC ), which is a branch of the U.S. Government, will guarantee your money up to $250,000 per person, per bank account. And in 2009, the FDIC has been very busy protecting the deposits for people in about 100 banks that went bankrupt!
From bank to bank, savings accounts are all basically the same, but you need to pay close attention to the fine print. The typical differentiators are:
• Interest rate
• Frequency of interest (earnings) posting periods
• Different minimum balance accounts that pay higher interest rates if you maintain the minimum amount on deposit
• Fees for withdrawals, statements, etc.
Certificates of Deposit (CDs)
You agree to deposit a specific amount of money for a fixed period of time called the maturity. In return, your financial institution agrees to pay you interest, usually higher than regular savings accounts, over this period. However, you will have limited opportunities to access these funds, so only use CD s for cash you don’t anticipate needing until after your CD matures. Should you need some or all of your money in CD s, you can withdraw it, but you will pay a substantial penalty, often forfeiting all the interest you have earned since you purchased the CD. There are several different terms for CD s: 3 months, 1 year, 2 years, 5 years,even 10 years. Generally, the longer the term of the CD, the greater return on your money. However, there is a catch: you risk interest rates going up when you buy a longer term. When you buy a CD, you are locked into that interest rate for the life of the CD. If you take out your money before the full term, the bank will charge you a substantial penalty as we mentioned before, so you can’t just sell a CD and then buy a new one with a higher interest rate if your current CD has a lower yield.
On the flip side, you are practically guaranteed a fixed rate of interest on your money for the complete term of that CD. In an era of high inflation rates, CD s are an excellent investment. The last time there were high interest rates in the U.S. was the 1980s, when rates of return on CD s were in the mid-to-high teens! Now, however, interest rates for CD s are very low: 2 percent for a one-year CD and just 3 percent for a 5-year CD.
Whether you have $100 or $10,000,000 in savings, we believe that you should have a basic understanding of how the stock market works. You should know how to manage your own money ,so that you can control your financial future. If you’re paying others to manage your money, now you can learn to do it yourself — it’s not as difficult as you might think. It’s a fact that most brokers and money managers can’t outperform the market. They pay themselves and their secretaries and their marketing expenses first, and then the investors get to share whatever profits are left. Learn to manage your money yourself, and you’re already ahead because you don’t have a broker or money manager’s expenses! Investing 101 will teach you about the different investment choices available to you, how the stock market works, how to evaluate stocks, and how to build and manage a well balanced portfolio. Before we jump in, please understand that this course is not about getting rich quick; this course is about getting rich slowly. Successful investing requires constant education and a disciplined approach. The goal is to grow rich over a lifetime of savings and prudent investing decisions, so please resist offers from so-called investment gurus who promise to make you a million dollars in the next year. We will show you how money and wealth are really generated; by carefully investing over time, and by balancing risk with potential returns.
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