Stocks and Bonds
Why does investing seem so complicated?
The number of ways you can invest is incredible. The worst part is always that investment world runs on the different terminology. In case you are new to investing clothing long before you encounter words like accretion, moving averages,amortization,average weighted price, open interest, futures and option, book closure etc. I want to stop before I place you to sleep. All you really need to do is to put your money in something where it'll be safe and grow. Is always that too much to ask for? okpay hyip
Exactly why are there so many different investing alternatives?
Is he really different! If you've been to a grocery store you will see boxes of different detergents, most of which is going to be labeled new! Improved! or even better New and Improved! But no matter what they call it, when its all said and done these boxes are filled with nothing more than SOAP, same as they have always been.
Investments are no different. At first glance it might appear that all these mutual funds, unit trust, REIT's, options, futures are unique and need encyclopedic knowledge to understand the technicalities. But more often than not what you are looking at is certainly not more than just an old strategy for investing in a new box.
Understanding purchasing simple terms:
In a family tree you will have a male and a female at the surface of the list from where all of those other branches came out. Similarly in investments at the top you have stock and bond. All the forms of investments are a couple of form or other of the. And their differences might be spotted just as easily since you can distinguish a man from your woman.
What are bonds and stocks and what is the difference backward and forward?
I will compare stocks with a racing car; all powerful snazzy, attractive, dangerous, accident prone and bonds on the family car; nothing much to consider, slow, always takes you where you are going, always there for you.
Some basic traits present in:
People investing in stocks want to see a return on their money, bond holders intend to make sure the return of their money.
Stocks have to do with taking risk and bonds are about avoiding risk.
Stocks offer unlimited upside potential, bonds offer limited downside potential.
Stocks mean ownership and bonds denote loaning. And then we can say one is an ownership investment and the other is a loan investment.
The main difference between an ownership investment as well as a loan investment is not too hard to understand. The differences are obvious once you know what to look for.
An ownership investment does not have an ending date. (When you buy a stock it never becomes due, you must sell it to get cash)
Loan investments in most cases have a due date (e.g. your fixed deposits with the bank)
Ownership investments rarely promise a unique return. A stock price can move up 10 times or remain static for years.
Loan investments often promise a fixed return. A 6 month deposit certificate promises 4% return.
Third major distinction is actually you will get your money back.
In ownership investment there can be no such guaranty. A stock's price can turn to zero.
The loan investments are often backed by the guaranty in the bank or the government.
With the above distinctions in mind try to figure out what you're invested in.
Few examples: your bank account or Government bonds: loan investment
stock or mutual fund: ownership investment
What can i invest in?
Having an excessive amount of investment in one type could be bad for the investor. Loan investments cannot keep pace with inflation, you might have your money safe but the purchasing power goes down. Too much risk avoidance can lead to less return. Similarly Ownership investments can give you without a penny in your pocket. Idea is usually to keep a balance backward and forward. Neither is in a class of good or bad or one superior to the other investment rather they serve different needs. Needs which could vary from one person to another depending on ones investment time horizon and risk appetite. Bonds and stocks complement each other.
In case you are new to investing first look at your risk appetite, needs and time horizon of investments to choose where you should put your money. An excellent opportunity that you read more about stocks, mutual funds and bonds in following articles.