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Before you can think about financial strategies, you should understand 2 concepts: Diversification and High Risk v.s. Low Risk Investments.
Diversification: Simply put, diversification describes the way that people can invest a little in numerous things rather than investing it all in one place. In other words, it is another way of using the phrase "Don't put all of your eggs in one basket." The reason to use this strategy is so that in case you lose money on one investment, statistically you should get profit in another. Sometimes a company's worth will temporarily drop and thus the reason for diversification is given.
High Risk V.S. Low Risk Investments: When you think of a "high risk investment", you might feel that high risk means you will lose money. However, investments with high risk are typically the ones which give you the most out of it. Despite this, they are still the most risky and should not be fully counted on. At this point, low risk investments seem a better option. For those who are less experienced in the market and simply want to try their hand at getting money, low risk investments allow people to most likely gain some sort of profit over time. Eventually, people get bored of this and thus high risk investments seem the better choice.
If you have come here to learn about the market, chances are you want to try your luck in it. Starting off small may be a good option for beginners, but others might be lucky enough to go back to the riskier ones. Here are a list of financial options, each with their own set of advantages and disadvantages:
The first financial option you have (and probably the most common) is the 401(k) plan. For those who don't know what this is, it's basically a plan that allows you to save a portion of your paycheck so that upon retiring, you can collect all the money saved. On the plus side, this basically sets up a retirement fund which would allow you to continue to have money even when you're not working. The major disadvantage to this is that it takes out a portion of your paycheck and therefore you will get paid less per check. If you are financially stable enough that you can afford to take out of a portion of your check, then it is recommended you do. You'll be thankful for it in the end.
Certificate of Deposit
Another financial plan in saving money is the concept of a Certificate of Deposit. This certificate works similar to a savings account in that at a certain point your money is deposited in the account in hopes of collecting it all back at a later time. However, the certificate works different in that a savings account can be regulated however the owner of the account wants while a CD is used in a fixed term, typically 3 months, 6 months, etc. On the one hand, because a CD is similar to a Savings Account, saving money is always recommended so that you can take all of the money saved at once in the end. However, choosing to use a CD means you must wait the amount designated in order to use it or else you will be forced to pay a penalty fee and thus any emergency that may happen while saving cannot be funded.
A less-known financial option are equities. Most people may not know what equities are so perhaps you are more familiar with what equities really are: stocks. In other words, equities are how much you invest in a company to gain a certain amount of ownership of a company. This option relates to the key terms written earlier. It is wise to invest a little in a bunch of companies rather than investing all your money in one. The question then leads to what companies to invest in. Certain companies continuously make a small amount of money and therefore are low-risk investments. This leads to the disadvantage of equities: losing money invested. When it comes to high-risk investments, you will typically earn more money...if they actually end up making a profit. If not then you can lose a serious amount of money and have debt.
For an alternative and much more professional financial option, there are what are known as treasury bills. These are, basically, savings bonds that have a fixed rate of interest over a period of time and cannot be taxed. They also cannot be transferred and are based upon non-negotiable terms. However, they are one of the safest types of financial option due to the fact that they are, essentially, investing with the government.
When it comes to bond, you have to know what they are first before knowing the different types of them. Simply put, bonds are a contract that a corporation issues which promises to pay back borrowed money, plus interest, on a fixed schedule. When it comes down to the concept of bonds, there are a few variations though:
To begin with, corporate bond are bonds in which the company itself will back it up and it will all depend on the company's ability to pay back the bond, even using physical assets as collateral until the debt is repaid. On the one hand, you will gain more money than you invested back. On the other hand, it is risky because the company may not be able to pay back the investment when you want them to.
Another type of bond that is uses are municipal bonds. These are, basically, a debt security issued by a state or country to finance expenditure and are exempt from federal taxes and from most state and local taxes. With these kind of bonds, the interest rate will determine the risk.
Another type of option for bonds are junk bonds. These are risky investments that have much higher rewards than safer bonds and is typically given out by companies with poor credit ratings. It's an investment that earns interest for shareholders while maintaining a net asset value of $1 per share hence the name "junk" bonds.