02.04 Investing Basics Essay

12. Describe an alternative investment that you might invest in someday, and explain why this investment is appealing to you. (2-4 sentences. 2.0 points) Peer-to-peer lending. It's a high return investment but also high risk. There are ways to invest in Peer-to-peer to minimize risk. It's a great alternative investment option.

The bonds can be issues with fixed interest or variable rate interest, each of which has its advantages and there disadvantages.

2.) Fortunately, it is not too late to buy in and make a substantial profit.

The return on a stock investment comes from dividends and price appreciation. Although neither is guaranteed, both have the potential for growth in the future. This is in distinct contrast to investments in debt vehicles that guarantee future payments but offer little or no possibility of a return that 's higher than promised.

Mutual Funds are a pool of funds collected from many investors in order to purchase stocks, bonds, and other investments in greater amounts. Mutual funds are shares of ownership in a group of companies.

think of a mutual fund as a company that brings together a group of people and invests

An insured dividend paying account that may be opened with a minimum amount and may be added to or withdrawn from as the member so chooses.

deposit to satisfy the Minimum Balance Requirement. Once the savings is opened and funded, the

Treasury bonds are issued by the government, have almost no default risk and the bond price goes down when interest rates rise. Corporate bonds are issued by corporations and carry default risk if the issuing corporation is not able to pay interest and principal payments. Corporate bonds make up a large portion of the overall bond market. Corporate bonds are characterized by higher yields than government securities cause there is a higher risk of a company defaulting than a government. The upside to this is that they can also be the most rewarding fixed-income investments because of the risk the investor must take on, where higher credit companies that are more likely to pay back their obligations will carry a relatively lower interest rate than riskier borrowers. Companies can issue bonds with fixed or variable interest rates and of varying maturity. Municipal bonds carry risk similar to corporate bonds, they are often issued by state and local governments. The major advantage of municipal bonds is for investors since the returns are free from federal tax, and furthermore, state and local governments will often consider their debt non-taxable for residents, making some municipal bonds completely tax free, sometimes called triple-tax free. The yield on a municipal bond is usually lower than that of an equivalent taxable bond. Foreign bonds are issued by foreign governments carry default and extra risk if the bond

Basically, it is a pot of money set aside just in case something happens that is unforeseen i.e., a job loss or illness.

It provides an evaluation of the bond issuer’s financial strength and ability to pay back the bond’s principle and interest. The bond rating also provides investors with some sense of security when investing in a particular firm. A higher bond rating implies a lower likelihood for the firm to default. Investors would feel more secured investing in such a bond, thus demanding a relatively lower rate of return. As such, high rated bonds enable the issuer to enjoy a lower cost of borrowing. A lower bond rating, on the other hand, serves as a negative signal to investors on the firm’s ability to repay debt obligations.

A trust who share a common financial goal which pools the savings of a number of investors.

Mutual funds are an easy, convenient way to invest, without having to worry about choosing individual stocks. A mutual fund can be defined as a single portfolio of stocks, bonds, and/or cash managed by an investment company on behalf of many investors. The investment company manages the fund, and sells shares in the fund to individual investors. When one invests in a mutual fund, they become a part-owner of a large investment portfolio, along with all the other shareholders of the fund. The fund manager invests the contributions when shares are purchased, along with money from the other shareholders. Every day, the fund manager counts up the value of all the fund's holdings, figures out how many shares have been purchased by

A bond is debt to whoever sells the bond to an inventor. If you buy an IBM bond, you are loaning money ($1000) to IBM instead of a bank loaning money to them. Just like a bank, you are going to charge IBM interest on your money, as well as a return of principle when the loan is due (ten years later). The company does not go to the bank to borrow the money, because the bank will rate the company as a high risk company. Hence, banks are really tight with their money. High yields bond investment relies on an credit analysis in that it concentrates on issuer fundamentals, and a "bottom-up" process. It focuses more on "downside risk default and the unique characteristics of the issuer. In a portfolio of high yield bonds,

Stocks (or shares), by definition, are shares of ownership in a company. By purchasing stocks in a company, the investor becomes a part owner, and thereby owns a percentage share of the company’s after tax profits. Stocks/shares have two key characteristics: 1) they can be issued in small denominations: an investor can purchase as many or as few shares in a company as he/ she wants, thereby becoming a