Here's a quick guide to financial institutions
some of the investment require an initial
options available to deposit of $1,000 or
you: more and limit the
number of withdrawals or
Savings Accounts transfers you can make
during a given period of
Such accounts are a good time.
place to store your
emergency funds. They CDs (Certificates of
are generally insured by Deposit)
the FDIC up to $100,000
for all deposits at one CDs usually earn more
institution and provide interest than a savings
easy access to your account and are a very
money. The chief low-risk financial
drawback is that vehicle. They are
interest rates tend to generally insured up to
be low. $100,000 by the FDIC for
all deposits at one
Money Market Deposit institution. You agree
Accounts to keep your money on
deposit for a fixed
These accounts usually period of time. Usually,
earn slightly higher the longer the term, the
interest than a savings higher the interest
account but still allow rate. There may be
easy access to your penalties for early
money. Some banks and withdrawal.
Stocks insolvent. Independent
bond-rating agencies
When you buy stocks, you such as Standard &
acquire shares of a Poor’s and Moody’s rate
company’s assets. If the the likelihood that any
company does well, you given bond will default.
may receive periodic You can find bond
dividends and/or be able ratings in each agency’s
to sell your stock at a publications at your
profit. If the company local library. Although
does poorly, the stock there are no penalties
price may fall and you for selling a bond
could lose some or all before the end of its
of the money you term, the value of the
invested. bond is subject to
interest rate
Bonds fluctuations. If
interest rates have
When you purchase a risen since you bought
bond, you are your bond, you may have
essentially loaning to sell it at less than
money to a corporation, face value. It is also
the U.S. government or a possible that the bond’s
local government for a yield will turn out to
certain period of time, be less than the rate of
called a term. The bond inflation. Some of the
certificate promises bonds available include:
that the issuing entity Savings bonds, Treasury
will repay you on a bills (commonly called
specified date with a T-bills) and other
fixed rate of interest. securities issued by the
Bond terms can range U.S. government.
from a few months to 30
years. Bonds are Zero coupon bonds, which
generally considered a are similar to savings
safer investment than bonds. No periodic
stocks because payments of interest are
bondholders are paid made. The bonds are
before stockholders if a bought at a discount and
company becomes are worth their
face value upon professionally managed
maturity. Municipal pool of money from a
bonds (munis), which are group of investors. A
sold by states, cities mutual fund manager
and other local invests your funds in
governments. They are securities, including
often tax exempt, which stocks and bonds, money
means you will pay no market instruments or
taxes on the interest some combination and
earned. Insured bonds, decides the best time to
which are less risky but buy and sell. By pooling
generally pay lower your resources with
interest rates because other investors in a
of the mutual fund, you can
protection.Convertible diversify even a small
bonds, which can be investment over a wide
converted into stock. spectrum, which should
High-yield bonds, reduce risk. There are
commonly referred to as many types of mutual
junk bonds, which are funds with varying
issued by corporations degrees of risk. Most
or governments with low mutual funds charge
ratings. They are very fees, and you often pay
risky. income tax on your
profits. Tax rules can
Mutual Funds be complicated,
requiring professional
A mutual fund is advice.
generally a
Annuities deductible. However,
taxes on the earnings in
Annuities may be the annuity are deferred
deferred or immediate. until you begin
Both are financial receiving payments.
contracts you make with Because annuities are
an insurance company. generally administered
However, a deferred by insurance companies,
annuity helps you they can be set up to
accumulate money for include life insurance
retirement, while an benefits, such as a
immediate annuity death benefit to a
provides you with a surviving spouse.
steady stream of
retirement income in Immediate annuities are
return for your money. usually purchased with
With a deferred annuity one lump sum payment and
you put money in, and then begin an immediate
over time it accrues payout. You receive
income and interest. The payment on a monthly or
payout occurs at some other regular basis,
later date, when you giving you needed
receive a steady stream income. You can
of payments to generally choose to have
supplement your other the payouts guaranteed
income. The by the issuer for as
contributions you make long as you live or
to a non-qualified choose from a number of
annuity are not other payment options.
tax-deductible. Both deferred and
Contributions to a immediate annuities can
qualified annuity that be either fixed or
is funding an IRA, variable. The issuer of
401(k), 403(b) or other a fixed annuity
qualified plan may be guarantees a fixed rate
before tax or tax
of interest (deferred) time your money is
or a fixed payment invested. Annuities can
(immediate). Although be a complicated
you are protected from investment, so discuss
any downturn in the them with a qualified
market, you won’t financial advisor to
benefit from any make sure you understand
upswings. A variable all the options and make
annuity can earn a the smartest decisions
flexible rate (deferred) for your financial
or pay a variable needs.
payment (immediate)
depending on the Your Home
performance of the
underlying investment Your home may be the
options you choose. largest investment you
Variable annuities are will make during your
designed to accumulate lifetime. The market
money or provide an value of your home is
income stream that determined by such
hopefully will rise over things as its condition,
time to keep pace with the neighborhood, school
inflation. However, districts, square
there is some risk footage of the house and
involved if the market house style
does poorly during the
