April 06 Topic - "Investing Your Money"

Investing money is a decision that is made by many people today. The reason that people invest is simple. They want their money to multiply for them; in other words, they want a return on their money. Nowadays, there are so many options available to you. It is often very confusing as to where to invest your money. Everyone has their own specific needs and wants. It is important to research every option and talk to a financial counselor to decide what is best for you. Within this newsletter many different investment options are explored.

01.  Savings Accounts & Certificate of Deposit
02.  Bank Money Market Accounts & U.S. Bonds
03.  Mutual Funds
04.  The Stock Market & Collectibles
05.  Glossary of Terms you should know

1. Savings Accounts & Certificate of Deposit

Savings Accounts

A savings account is a simple risk free way to invest money. Generally, anyone can go to a bank and open a savings account. You should shop around and see which banks offer the best interest rates. Banks are competitive so you will probably will not see that much of a difference however a couple points can make a difference. Also, be sure to see any restrictions or fees associated with opening and maintaining a savings account. They will vary with different banks or credit unions.

The benefits to choosing a savings account as an investment option is freedom. Your money is not tied up. You will usually have the luxury of being able to deposit or withdraw money any time you like. Also, savings accounts are very safe. You will not lose your money. Banks are FDIC insured, which means that the Federal Government insures your money up to $100,000 in a single account. If something happens to the bank where your money is being held, the Federal Government will return your money to you.

Most savings accounts pay interest on the money you invest plus the money that you earn. This is referred to as compound interest. The majority of banks do this annually however some do it more frequently. The more frequent banks pay the more money you can earn. Remember the safer the investment the less money you earn. Since a savings account is very safe the return on your money will be less than other investments.

Certificate of Deposit

Certificate of Deposit is often referred to as CDs. CDs can be purchased at banks. The bank will issue you a certificate, hence certificate of deposit, explaining the amount that you have deposited plus interest rate and how long you must leave your money in this account to be eligible for the return rate.

CDs generally pay higher interest rates than savings accounts because you do not have the luxury of removing the money at your leisure. CDs require you to keep your money in them for a specified amount of time. The time can average between 3 months and sometimes goes up to 7 years. You can remove the money earlier but will have to pay a penalty. CDs are like savings accounts in the sense that they are safe. They are insured up to $100,000; therefore you will not face the risk of losing your money.

CDs return depends on different terms and conditions. The general rule is the longer you choose to have it in a CD the more return you will receive. Interest rates on CDs are fixed. This means that as long as you own it the interest rate will never change. The CD also rewards you with compound interest, which allows you to make a nice return on the money invested, plus the interest you earn.

2.Money Market Accounts & U.S. Bonds

Money Market Accounts

Your bank offers a Bank Money Market Account. There is a minimum amount of money required to open this kind of savings account. Since it requires a minimum amount, this type of account usually pays more interest than a savings account. There is not a fixed interest rate, it changes day to day. This type of account does let you withdraw money without any penalties and is also FDIC insured up to $100,000.

This type of account does usually require that you maintain a certain balance in order to receive the benefits. Most banks do not require any monthly fees or charges for maintaining this account.

U.S. Bonds

U.S Bonds are a very old and popular way of investing money. They started back during the First World War. The Federal Government used them as a way to make money to fight the war. Since then people still choose them as a way to invest. They can be purchased at a bank. There are two types of U.S. Bonds.

The first type is known as EE Bonds. They are considered the discount bonds. You buy them at half of the face value. Each year that you keep the bond the value in-creases. Once the bond reaches its face value it can still earn interest for 30 years from the date it was issued. The second type of bond is known as I Bonds. These bonds are sold at face value.

They earn interest and are tax-free. Often times they are used to pay for college. Bonds are a safe way to invest they are backed by the full faith and credit of the federal government. Bonds are a long-term investment. Your money will be tied up for years and years. Also, interest rates are very low with bonds.

3. Mutual Funds

Mutual Funds is when money of investors is combined to buy many kinds of invest-ments, which include stocks, bonds and real estate. This investment does carry a high risk because no one insures it. You will lose your money if the price of the fund drops. Mutual funds are safer than individual stocks because you are diversifying your funds. Buying lots of stocks and bonds are safer than one because the theory is that if one drops then the others will hold their value or make up for the loss of one.

Mutual funds are professionally funded. They have a lot of knowledge in what to buy and the risks of all investments. You have the option with mutual funds to withdraw your money any time you would like. You are only paid what the shares are worth on that day that you withdraw. They may be worth more or less than what you actually paid for them. You are charged a fee for investing in these since the operators need money to operate.

4. The Stock Market & Collectibles

The Stock Market

The stock market is a term that is used to describe a place where stocks and bonds are "traded" which means bought and sold. The purpose of the stock market is to purchase a stock, hold on to it for a little while and then sell it for more than you paid for it. Stocks are units of ownership in a company. The stock market benefits the owners of the company plus anyone who invests in it. Companies use the money they make from stockholders to better their company. Some things they use the money for include but are not limited to be research, creating new products, and improving the products that they have.

People who invest in companies are considered shareholders. Shareholders own a part of the company buy investing in the stock. If the company does well then the share-holders "share" in those profits. In the same aspect if the company's profits fall you will also lose money. The stock market is a very risky investment. The stock market changes from second to second. Expert's advice not to use invest any money that you will need or be in debt if you lost. For the most part people who succeed in the stock market keep their money in it for 15 years or longer. If that is not an option for you then it may be wise to choose a different investment option.

Collectibles

Collectibles are items that you hope are worth something someday in the future. Baseball cards, beanie babies and stamps are popular collectibles over the past recent years. There is no guarantee in this type of investing. Some people do this as a hobby and just hope that one day it will pay off. Although they may increase in value over time they may also decrease.

The problem with collectibles is that once you have purchased a collectible the only way to get your money back is to find a buyer. This type of investment is long term so you must plan on being patient.

5. Glossary of Terms you should know

Appreciate: to grow in value.

Asset: any value of item that you own

Bond: an IOU issued by a corporation or government that confirms that you are lending the corporation or government money.

Certificate of Deposit: a type of investment that you loan money for a certain amount of time and you are guaranteed the same rate of return.

Compound Interest: interest on an investment that is calculated on the money you invested plus the money you earn.

Invest: to put your money into something that will show you a return.

Money Market Account: a type of savings account that invests with CD's and treasury bills and pays a rate of interest that changes with the economy.

Mutual Funds: a savings account that uses money from different savers to buy different securities. This is a way to diversify your investments.

Return: The amount of money received from an investment.

Risk: The likelihood that you will lose money.

Unearned Income: the money you make that is not a result of labor such as interest.

U.S. Bond: an investment where you lend the government money and are paid on the terms agreed upon.

Withdrawal: taking money out of an account.

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Got a question? Then contact our Education Team on 561-883-2398 Ex.310 United conducts regular seminars on financial education, including "How to Budget", come along and join us - to reserve your seat contact our Education Team on 561-883-2398 Ex.310

Newsletter 04
Rev.1
April, 2006