Investment Hunter

Hunting for Investments

Risks and Rewards

401(k) plans-typically range from variable risk, to low risk. 401(k) are most often pension accounts, used to host retirement savings.

Bonds-The interest rate risk of buying a bond varies depending on the price of the bond. Typically, the longer maturity period of a bond, the higher the risk of it dropping in price rises.

Certificates of Deposit (CDs)-A form of time deposit offered primarily by banks, savings and loans, and credit unions. Like bonds, CDs have a maturity date(usually 6 months to 5 years), when the investor receives the principal back with interest during the period that Cd is held. The federal government insures funds deposited in CDs at most banks and credit unions up to &100,00 per depositor in any given institution. The main risk that investors in CDs face is the loss of interest or possibly some principal if funds are withdrawn before the maturity date. These certificates are mainly used to help on a major purchase, rather than for an emergency fund.

Corporate bonds-Help businesses expand. For an established company, like Sony or Intel, the risk is low but for a non-established company the risk is much higher.

Municipal bonds-make state and local projects possible. These bonds are tax-exempt, and usually used by the wealthy, as well as being low risk.

Money market mutual funds-Involves financial assets with maturities of one year or less. Allow investors to buy shares that represent an investment in all the financial assets held by the fund; also allow investors to own a variety of short-term financial assets, such as Treasury bills, municipal bonds, large-denomination CDs, and corporate bonds. They are low risk, but low return as well.

Junk bonds-are high-risk, high-yield corporate bonds. The risk involved is similar to that of investing in stocks. These bonds generally pay a higher coupon rate than government bonds because the risk is higher.

Government savings bonds-Savings bonds offer fixed interests rates over a set period of time. These bonds aren't subject to local and state taxes as well, and are low risk and medium reward.

Treasury notes and bonds-help keep the federal government operating. These bonds are medium risk and medium reward.

Treasury bills-one year or less maturity date. The money borrowed through the sale of these securities helps keep the government running. The risk and reward factor for this kind of bill varies.

Equities-are the value given to the shares of a company. Much like a corporate bond, equities' value depends on how the company is faring at the moment, with established companies having low risk factors, and non-established companies having high risk factors.

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