From CDs to Mutual Funds: Common Investment Strategies
While saving a portion of your monthly paycheck is an excellent idea, it is often difficult for people to figure out the best way to invest these savings. There are many options out there, and the more you know about them, the more comfortable you will be about making an investment choice.
There are several types of retirement or pension plans to consider. Many employers offer a 401(k) plan, which is a pension plan account where a portion of your salary is deducted and placed into a special account where it earns interest. The money is taken out before taxes are levied on the paycheck, and you pay the taxes years later when you withdraw money. Often your employer will match a portion of this money, which further helps you plan for retirement.
If your employer does not offer a 401 (k), another popular retirement plan option is an Individual Retirement Account or IRA. There are several different kinds, including SEP IRAs and Roth IRAs. Roth IRAs are interesting because the withdrawals typically are tax free because the money is deducted from your after-tax assets. Another positive aspect about IRAs is that if you have to declare bankruptcy, a portion of the IRA might be exempt from bankruptcy.
While it is wise to set up a retirement account, it also is prudent to invest additional money in other types of financial opportunities. These days, with interest rates so low, putting money into a Certificate of Deposit or a savings account returns very little, but on the flip side, you might be wary about investing in a specific stock, which can be risky. Putting your money into mutual funds, however, can be a great way to earn a bit more interest than savings accounts but without the risk of a single stock.
A mutual fund is known as a type of collective investment vehicle, which means that a group of investors are pooled together and provide money. This money is used to purchase a variety of securities, and part of the appeal of the mutual fund is that the securities are supposed to be highly diversified which minimizes risk. The most common type of mutual fund is an open-ended fund, and there are thousands of these types of mutual funds. One of the perks of this mutual fund is that your fund manager is required to buy back your fund at the end of any trading day if you want to sell.
There are literally hundreds of different mutual funds, and generally they target a specific industry or perhaps a region. For example, you might opt for a China fund or an Asia fund that invests all of the money in various businesses in China, Hong Kong and other Asian nations. These investments will be in many different industries and in many different companies, including banking and real estate holdings, technology, energy and other sectors. Another option is to invest in a type of energy fund, which might include companies that drill for oil, natural gas companies, gas companies and other similar businesses. A green energy fund is a fairly new addition to the market, and there are several to be found. These invest in energy that comes from wind, water and solar power.
There are several types of retirement or pension plans to consider. Many employers offer a 401(k) plan, which is a pension plan account where a portion of your salary is deducted and placed into a special account where it earns interest. The money is taken out before taxes are levied on the paycheck, and you pay the taxes years later when you withdraw money. Often your employer will match a portion of this money, which further helps you plan for retirement.
If your employer does not offer a 401 (k), another popular retirement plan option is an Individual Retirement Account or IRA. There are several different kinds, including SEP IRAs and Roth IRAs. Roth IRAs are interesting because the withdrawals typically are tax free because the money is deducted from your after-tax assets. Another positive aspect about IRAs is that if you have to declare bankruptcy, a portion of the IRA might be exempt from bankruptcy.
While it is wise to set up a retirement account, it also is prudent to invest additional money in other types of financial opportunities. These days, with interest rates so low, putting money into a Certificate of Deposit or a savings account returns very little, but on the flip side, you might be wary about investing in a specific stock, which can be risky. Putting your money into mutual funds, however, can be a great way to earn a bit more interest than savings accounts but without the risk of a single stock.
A mutual fund is known as a type of collective investment vehicle, which means that a group of investors are pooled together and provide money. This money is used to purchase a variety of securities, and part of the appeal of the mutual fund is that the securities are supposed to be highly diversified which minimizes risk. The most common type of mutual fund is an open-ended fund, and there are thousands of these types of mutual funds. One of the perks of this mutual fund is that your fund manager is required to buy back your fund at the end of any trading day if you want to sell.
There are literally hundreds of different mutual funds, and generally they target a specific industry or perhaps a region. For example, you might opt for a China fund or an Asia fund that invests all of the money in various businesses in China, Hong Kong and other Asian nations. These investments will be in many different industries and in many different companies, including banking and real estate holdings, technology, energy and other sectors. Another option is to invest in a type of energy fund, which might include companies that drill for oil, natural gas companies, gas companies and other similar businesses. A green energy fund is a fairly new addition to the market, and there are several to be found. These invest in energy that comes from wind, water and solar power.
About the Author:
Cleveland Jernigan likes writing about investments. For additional information about Asian investments, or to find out more about Asia Pacific bond funds, go to these fund websites today.
