Investments
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In any investment there are guaranteed risks, but in the order to achieve pecuniary return one must take chances. Investments promote economic growth but can also have negative results. The key factor in how investments will perform over time is the mix of stocks, bonds and cash you choose.
As a saver, one should not invest majority of their assets in a single company or enterprise. For example, a friends business seems successful and one wants to invest in it for future profit. This is reasonable but do not invest all the money into that one company because according to Steve O Donnel, 50% of all businesses fail. The strategy of diversification is a smart way to reduce the risk of losing money, while still making a smart investment.
Having a savings bond can be a helpful tool for the future but can also be a way of losing money. If inflation goes way up, interest rates will go way up and the value of “a promise of money in the future” (Kiplinger) bond will go way down. “Bonds typically pay the investor a fixed amount of interest for an amount of time, but the rate of the return for the bonds is usually lower than those in other investments”. (Economics; text) But for the most part Bonds have historically offered a much lower return than equities at somewhat reduced risk.
Suppose somehow an individual collects a non-negligible amount of cash and wants to invest it. If they are investing for long haul, then common stocks are the only reasonable choice since they offer the best return. According to the Efficient Market Hypothesis, (Kiplinger) all stocks are fairly valued because everyone on Wall Street has the same information. This is one sure way to know that eventually profits will be made with he money.
A certificate of deposit, or CD, is a special type of deposit account that typically offers a higher rate of interest than regular savings accounts or money market accounts. CDs are considered very safe investments because hey are insured by the federal government. There is no risk at losing money, but risking your money in a more profitable company or corporation can be more or less fiscally rewarding depending on the risk taken. Some people “ladder” their CDs. This is a strategy where you split up your savings and buy CDs with different due dates. CD ladders help get higher yields while still giving some access to your money.
Over all the