- 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.
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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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 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.
- 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.
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.