Investing
From Debt Free Dude
Investing is a very important part of a balanced financial plan. Debt is a situation where you are paying other people interest to use their money. Investing is a situation where you are earning money by letting others make use of your resources.
There are many different ways to invest money. Here is a list of some of the types of investments that are available:
- Stocks -- By investing in stocks you actually buy part of a company. If they company does well you may receive dividends. You can then sell the stock later.
- Bonds -- Bonds allow you to loan a company or government money in exchange for interest.
- Mutual Funds -- A fund manager will buys and sells stocks hoping to make a profit. When you buy a mutual fund you are turning your money over to the care of the manager instead of buying stocks yourself.
- Index Funds -- An index fund is a way to invest in a group of stocks all at one time. This is similar to mutual funds, but not as actively managed.
- Savings Accounts -- A savings account is the basic way you keep money at a bank. The bank loans your money out to others and pays you interest. Usually you can get your money out any time.
- Certificates of Deposit -- A CD is similar to a savings account except you agree not to withdraw your money for a certain period of time. In exchange, the bank gives you a higher interest rate.
- Money markets -- A money market account allows the bank to invest your money in a variety of investments (CDs etc.). You can usually only make a few withdrawls each month, but the interest rate is h
- Futures -- futures are a type of contract in which buyer and seller are obligated to the excahnge of an asset.
- Options -- an option gives the holder a right to buy or sell an asset, but does not mandate that the holder do so on any particular date.
- Commodities -- commodities are goods that are supplied without regard to the qualitative differentiation of that good.
- Real Estate -- real estate is simply a legal term that describes any permanent fixture that remains on a piece of property, such as a building.
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