You have reached the MoneySpan.com, our website dedicated to all things money and finance. Our site will be organized into broad categories. The first category is Investments. There are several topics that fall into this category and we’ll outline them below.
Best Investments For 2012/2013
As we all know, the financial markets have been in turmoil recently. You should take the state of the market into any financial strategy. Those of you in the younger crowd typically can tolerate more aggressive investments where the capital invested is much less secure. People who are retired or near retirement may want to consider investments where the initial investment is guaranteed. So which are the best investments for 2012/2013? The answer depends entirely on you and your level of risk tolerance as well as your financial goals.
If your goals are big growth and high risk, you are going to invest in very different areas than someone who is simply looking for an insured investment with modest returns.
Investing In Bonds
What is a bond? Bonds are securities that are debt related. You typically invest in a bond and the entity that you are investing in, be it a government, company, etc. will give you interest on your bond and will pay back the principal at a later date. Now bonds have a reputation of being a relatively safe investment. You must exercise caution because this is a broad statement and you must carefully examine the bond’s terms to make sure that your principal is guaranteed. Bonds from municipalities are popular because some of them are exempt from certain taxes. This should be considered when evaluating the overall return on your investment (ROI). Keep in mind that the price you pay for safety is the return on your investment. You are trading security for returns. In plain English, that means you get less return for your money but you are investing in a safer financial instrument.
Investing In Stocks
When you invest in a stock, you become a part owner of the company offering that stock. There is so much written on this topic. Stock investing can be very risky because there’s no guarantee of anything, principal, gains, etc. Stock offerings vary widely from company to company. Some offer dividends, some don’t. Stock prices vary from day to day and economic and corporate events can cause a stock to soar or plummet. You must be prepared for these risks when evaluating any stock for purchase.
When looking at individual stocks for purchase, you must evaluate the company and the industry as a whole. Is the industry on an upward trend or is it a victim of the current economic slowdown? Are you looking to pick up a bargain in hard times? If so, is the company undervalued? What’s the company’s current financials? Do they have lots of liquid equity? There are so many questions to answer, so some investors turn to investments based on a number of stocks to limit the risk associated with any single stock. That brings us to our next topic.
Investing In Mutual Funds
Mutual funds offer an investor the ability to invest in a multitude of investments that they otherwise may not have access to. A mutual fund may be invested in stocks and bonds from corporations, government entities, domestically or internationally.
When evaluating mutual funds, it is important to look at the focus of the fund. Is the fund manager looking at growth? Are they aggressive, or conservative? What is their track record? Is the fund open to new investors? What is the minimum investment required? Some funds require an investment of at least $5,000 initially.
Another consideration is the amount that is charged back to the investors for the administration of the fund. Any amount charged to the fund for administration comes right out of your pocket. So-called no load funds supposedly have no administrative fees, but you must examine the fine print to make sure that there aren’t any hidden fees built into the fund.
Investing in Commodities
Commodities are raw materials like oil, metals, produce, things like sugar, coffee, cotton, etc. Typically they are traded on the Futures Market where investors speculate on the direction that the price will take.
This type of investing has significant risks and volatility. For example, if you are trading futures based on crops and an unexpected weather event occurs, then depending on which way you speculated the price would go, you could be wiped out or make a significant sum of money. This type of investment is certainly not for the average investor because of the inherent risk.
Investing in Gold
Investing in gold has become so popular and we are being bombarded by gold advertisements. The reason for this is when financial markets are unstable, people turn to something that has inherent value, a physical good of substance. Gold has historically been held in high value throughout history. Just look back at the temples of Egypt and you’ll see gold everywhere. The public perception of gold is that it will always be valuable so in times of turmoil, investors will turn to gold as an investment vehicle. The problem is when any investment reaches its peak price. Gold prices are very high and the potential for a downswing in pricing is very real right now. As with all investments, proceed with caution and do your research.
So, we’ve taken a look at some of the major investment categories and there’s more to come. What’s the best investment for 2012 or 2013? As we’ve discussed, it depends on your investment strategy, tolerance for risk, income expectations, and available funds.