Savings and Investments


Personal Savings and Investment

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Stock Investment Basics

Money held in bank and credit unions are guaranteed by the Federal Deposit Insurance Corporation or FDIC for $250,000 in each category of savings or checking or current account, joint accounts and retirement account. If a bank fails or goes bankrupt your money is guaranteed by the FDIC.

There are no guarantees when you invest money in mutual funds, stock market or real estate investments if the investment goes bankrupt.

For this reason savers should protect their savings by keeping a safe portion their money at the bank in Certificate of Deposits (CDs). The interest income is less than the returns on mutual funds and stocks however your money is guaranteed.

Asset Allocation

How much money should one keep in their current accounts for expenses and emergencies? A general rule is 3 to 6  months salary to put aside.

What percentage of your portfolio should be invested in stocks? In bonds? How much should an investor hold in cash or money market funds? Answering these questions is a process known as asset allocation.

There are many ways to allocate assets in a portfolio. Perhaps the most basic decision, however, is the consideration between stocks and bonds. Stocks offer the potential for long-term growth.

Bonds offer annual income, usually in excess of inflation. That’s important to retired people and others with limited sources of income. However, bonds don’t generally offer growth. Cash or money market funds may offer more safety and liquidity. However, returns are generally much lower than stocks or bonds.

One way to determine the mix of stocks, bonds, and cash is simply to look at age and life expectancy. In a person’s early years, investment time horizons are long and the volatility of stocks can more easily be tolerated. As a person approaches retirement, he or she becomes more dependent on income from investments, which would favor bonds.

However, retirement should not be the end of a person’s investment horizon. With life expectancies reaching into the 80s, it’s quite common for a person to live 20 or 30 years beyond retirement. As a result, it’s still important to own some stocks for growth.

Financial institutions, banks and credit unions can acces your risk profile by having you fill in a set of questions about your financial situation.

Investing in CDs carry less risk than investing in mutual funds which in turn carry less risk than stocks. The more risk you take the greater the potential earnings reward. At the same time more risk exposes you to more potential  losses.

It is generally recommended that one should begin with mutual funds and then after a few years graduate to buying stocks. Mutual funds have experienced professional money managers who  are specially trained to research companies before they invest the funds money.

Investment income is a form of passive income. Investment income can come from, savings accounts, CDs, mutual funds, stocks, bonds, real estate, or other investment vehicles. The common theme is that they ideally produce a return on the money you put into them.

Creating income through investing is a process of accumulating wealth. The more you invest the more potential your earnings. Investing is a great way to increase your disposable income in the long run.

Monthly  Investing

You’ve got your retirement savings account contributions started and are ready to start a pure income portfolio then incremental investing is an excellent way to begin. You don’t have to jump into the market with your life savings to make money. Even relatively small amounts can result in decent returns.  Arrange an automatic savings or investment account at your local bank or credit union where you save a portion of your salary every month.

Create wealth with compound interest. Do not take unwanted risks. Be conservative. Protect your investments and plan for the long term.

You do not need to take unnecessary risks to build up a million dollar portfolio. Make sensible and common sense decisions. The magic of compound interest will grow your investments over time. Compound interest is when you earn interest or income on money you have invested and also earn money on the income and interest consistently over time through an exponential time factor. As you continuously make regular additional investment contributions which in turn keep compounding your money for maximum growth.

Rule of 72

The rule of 72 simply states that your money will double in time when you divide 72 by the interest or earning income percentage. The answer to this formula will give you the number of years it will take to double your money.

For example if you were to earn 8 percent annually for your investment. The rule of 72 says that your money will double in 9 years. 72 divided by 8 % = 9 years.

If you were to earn 10 percent then you money would double in 7.2 years. 72 divided by 10 = 7.2 years.

Regular contributions to savings, investment and retirement savings accounts that are compounding annually provide for explosive growth of your money.

This formula placed within a retirement investment account which accumulates growth while tax exempt is one of the best investment choices available.

Added to this the government rewards you with tax credits to invest in your retirement and many employers also match your contribution up to 50 percent.

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Investment Millionaire
Make a plan and identify your goal
Stop wasteful spending
Start saving
Acquire a good education
Find quality employment
Savings and investments
Buy your first home
Buy adequate insurance
Retirement planning
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