SAVINGS/INVESTING TOOLS

• Savings Account ($40,000)
• Money Market Account ($25,000)
• Stocks ($5,000)
• Index Funds ($10,000)
• Bonds ($20,000)

Savings Account

Investment: $40,000

- A savings account is a lending investment where an individual lends money to a bank for the benefit of being able to access their money at any time.

Savings Account

- The common or average interest rate for a savings account is generally 1% per year and does not keep up with inflation.

- The purpose of a savings account is to make money grow, which means that the more money that is made, the more it earns interest on it. For that, the risk level is low.

Savings Account
Additional Information

- A benefit to a savings account is that one can leave their money in an account for an indefinite period of time.

- A savings account can be used as an overdraft account if one is ever in the need of assistance with finances.

Savings Account

If one is interested in starting a savings account, any bank offers them. In order to start one, an individual needs to provide some sort of identification, their social security number, and, if required, money to cover an additional start up fee.

Savings Account

- I chose to use a savings account as an investing tool as I know that I will have security with my money. Since I would be using it as a savings tactic, I know that there will be a low risk while using it and the interest rate is low. This is a good reason why I invested $40,000. No additional fees will be charged to my account throughout the period that I will be using it, which is a benefit.

Money Market Account

Investment: $25,000

- A money market account is an interest-bearing account that typically pays a higher interest rate than a savings account.

Money Market Account

- The common or average interest rate earned on a money market account was 0.52% in the beginning of 2012 to 0.26% in 2016.

- Since money markets have relatively low returns, The risk level is considerably low as those participating in employer-sponsored plans might not want to use this fund as a long-term investment option since they will not see the capital appreciation they require to meet their financial goals.

Money Market Account

Additional Information

- Benefits: interest rates, no fees, FDIC insurance, and check writing and debit card access.

- With a money market account, you can access some of your money each month, but not all of it. For a little less freedom, you get a better interest rate.

Money Market Account

- In order to open a money market account, an individual has to buy into a money market fund. They have to track their investment, and use records for tax filing.

Money Market Account

- I chose a money market account as my investing tool as it is decent to use when wanting a decent return from a safe investment. I've invested $25,000 as I can take advantage of rising interest rates by keeping my money in an investment that will adjust to the markets.

Stocks

Investment: $5,000

- An individual owning part of a corporation (shareholder) is considered a stock. (Rights and responsibilities of ownership).

Stocks

- The common or average interest rate of a stock varies as it is dependent on what is purchased.

- The risk level for a stock is considered moderate to high as returns are not guaranteed, so it is unknown how much one will make. For instance, one may lose money because stock prices can change often throughout time.

Stocks

Additional Information

- Investing in stocks can be very risky and dangerous, especially with the business aspect. This can cause a possibility for bankruptcy.

- Some benefits to investing into stocks are: investment gains (if the returns are great), having a divided income since a stock is a share, and having ownership of ones own share from the corporation.

Stocks

- In order to open and invest in stocks, one has to buy stocks from the stock market company within the stock exchange.

Stocks

- I chose this tool for an investing aspect as it gives a broad outlook of how it can be beneficial and how it can be risky. I invested $5,000 because, as said before, a stock is a share from a part of a corporation. Since one has to be wise about their investment, I used a smaller amount to start off so that I wouldn't risk having a devastating downfall in my earnings and I wouldn't risk bankruptcy, seeing as the stock market is a very rough institution and it would be a new investing tool to me. It would be wise to venture around and not be too risky right off the bat.

Index Funds

Investment: $10,000

- An index fund is a mutual fund that keeps up with the stock market.

Index Funds

- The common or average interest rate earned vary significantly depending on the index and the market.

- The risk level for an index fund is pretty moderate, as for the return potential as well since it depends on how much money is invested and returned.

Index Funds

Additional Information

- When investing, the costs are generally accompanied with low fees.

- Index funds are similar to stocks as one can invest in stocks and the stock market.

Index Funds

- In order to open and invest with an index fund, Vanguard for instance is a good place to start and invest. Typically, ones checking account is required to manage everything electronically. The fees are quite low when investing directly compared to the returns that are earned.

Index Funds

- I chose to use index funds as an investment tool as my first impression was a moderate risk rate, as well as a pretty moderate return rate as well. It is a new tool to me also, so it gets me eager to try something new, especially at a low risk. I invested $10,000 as its not a super high amount, but it is also not too low of an amount to start off with either.

Bonds

Investment: $20,000

- A bond is a debt investment in which an investor loans money to an entity. (10 years or longer).

Bonds

- The common or average interest rate earned for a bond varies depending on the amount of money that is invested.

- The risk level for a bond is low, as well as a low to moderate return rate since it is offered to the public along with little to no fees.

Bonds

Additional Information

- Some benefits to a bond include high yield security, along with less interest rates most of the time.

- Interest is usually payable at fixed internals (semiannual, annual, and sometimes monthly).

Bonds

- Bonds are typically offered by the government, municipality or corporation. Since a bond is a form of loan or IOU, Banks are there for that reason. In order to invest, one has to qualify in order to for a specified agreement.

Bonds

- I chose to use a bond as an investment tool as it is a very helpful tool when dealing with finances. Since it mainly deals with loans and IOUs, I invested $20,000. It also complies with low risk rates and low to moderate return rates.

Investing

All in all, Diversification is vitally important as risks should be noted and reduced by investing in a variety of assets. It is a risk management technique to thrive with finances. Individuals should consider changing their savings and investing plans throughout their life cycle so that they get a feel with how other tools work and not limit themselves to one technique. This can help and let them get to know how they can have a major impact on their investments.