Sunday, April 28, 2013

Investing: How to Lower the Risk, part 3



Investing: How to Lower the Risk, part 3

By Keith Bunn Jr.
April 28, 2013

Good morning! Before we get into part 3 of this series, let's review last week's blog for a bit.

Review

C.D.'s are Certificate of Deposit, and you get them at your local bank. They are low risk accounts and make a horrible rate of return. And if you take your money out early, you have to pay a penalty for early withdrawal.

Money Market accounts are another low risk investment you get with an investment broker. Again, these accounts make a horrible rate of return, but you can normally get them with either check writing privileges or a debit card or both. They also don't  penalize you if you write a check or use the debit card as long as you don't go over a specific amount at any one time. Money Markets are great place to keep your emergency funds. 

Single Stocks: When you buy stock in a company, you are buying a very small piece of the company. The rate of return on these stocks can be high, but also carry high risk with them for the simple fact you are not diversified enough. If the company is profitable, they may issue portions of those profits to you called dividends. I do not recommend single stocks to anyone for that reason, no matter what company the stock is in.

Bonds and Mutual Funds

Bonds are a debt instrument which a company that we loaned money to now owes us that money back plus interest. Typically, bonds have an end date of when they have to be paid off. So in a sense, bonds are nothing more than an I.O.U. They are a high risk investment because they act like a single stock, meaning, their ability to pay you back is based on their performance. So I don't recommend bonds.

Mutual Funds are where investors like you and I, pool our money together to invest into 90 to 200 companies. Professional portfolio managers manage the pool or fund and our return comes as the value of the fund increases. Simple put, in just one mutual fund, you and I could be investing anywhere between 90 to 200 companies at one time. In other words, we are being diversified! Which lowers our risk. Now what makes mutual funds even better, is that there are all kinds of different mutual funds out there to choose from. And the name or kind of mutual fund it is, tells you what is inside the mutual fund. here are a few examples. If it is a Bond Mutual Fund, you would be investing in different kinds of bonds. If you bought a fund that had Dove soap or Ben & Jerry's Ice Cream in it for example, those are foreign companies so that fund would be an International Stock Mutual Fund. A fund that had companies in it that are growing like AT&T, Fed Ex, or Micro Soft would be called a Growth Stock Mutual Fund. I think you get the point.
The thing I like about mutual funds is that there are all kinds of funds out there and each one of them have tons of companies inside them that make you diversified. Because if some of those companies inside the fund goes down in value, the others maybe going up, making up the difference. This is a good way for those of you out there that like a specific company and want to invest in it, and to lower your risk. Just buy a mutual fund that has that company in it. A good investment broker should be able to help you find that fund.

Questions

1) Have you bought Bonds before? If so, how did they work for you?

2) have you bought Mutual Funds before? If so, how did they work for you?

3) Do you feel confindent in your investments?

4) Do you feel like you are diversified enough?

The main reason I do all this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at cavuscoaching@gmail.com. You can also find more money news, facts and ideas, on my Facebook and/or Twitter pages. I'd be grateful if you followed me. Thank you!


Sunday, April 21, 2013

Investing: How to Lower the Risk, part 2



Investing: How to Lower the Risk, part 2

By Keith Bunn Jr.
April 21, 2013


Hi everyone! I hope whenever you are reading this, you are doing well!
In this week's blog, we will discuss the different types of investments you can buy. But first, let's take a moment and review last week's blog.

Review

Remember, there are 3 things you need to have or do when it comes to investing. First, you need knowledge, you need to know all the ins and outs of the investment you're thinking of getting into to the point you can explain it to someone else and they get it. 
Second, you need to be diversified. Don't put all your money in one type of investment. Because if the market goes down and you have the majority of your money invested in one company stock, or investment you have a greater risk of losing all your money. Think of it this way, investing is like manure, keep it all in one place, it stinks. Spread it around, it grows things.
And last, but not least, you need to leave your investments alone. If you're not willing to leave them alone to grow for at least 5 years, you don't need to be investing at all.

Types of Investments

Most people are familiar with a C.D. you can get at your local banks. C.D. is the abbreviation for Certificate of Deposit, which means that you get a certificate when you made a deposit in your bank's special savings account. They are low risk accounts and make a horrible rate of return, especially for the time you have to leave it in there for. And if you take your money out early, you have to pay a penalty for early withdrawal. I don't recommend people getting C.D.'s because of those reasons.

Money Market accounts are another low risk investment you get with an investment broker. You can also get Money Market 'type' accounts at you local banks. Again, these accounts make a horrible rate of return, but what I like about them is that you can normally get them with either check writing privileges or a debit card or both. They also don't  penalize you if you write a check or use the debit card as long as you don't go over a specific amount at any one time. This is a great place to keep your emergency funds just for that reason.

Single Stocks: When you buy stock in a company, you are buying a very small piece of the company. The rate of return on these stocks can be high but can go up and down as the value of the company goes up and down. If the company is profitable, they may issue portions of those profits to you called dividends. These type of investments carry high risk for the simple fact you are not diversified enough. Again, all your eggs are in one basket. I do not recommend single stocks to anyone for that reason, no matter what company the stock is in.

I'm going to stop here for this week's blog just so I don't make it too long. I will pick this up again next week with Bonds and Mutual Funds.

Questions

1) Have you ever owned one or more of these type of investments? If so, how did it go for you?

2) Do you keep your emergency fund in any of these type of investments?


The main reason I do all this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at cavuscoaching@gmail.com. You can also find more money news, facts and ideas, on my Facebook and/or Twitter pages. I'd be grateful if you followed me. Thank you!



Sunday, April 14, 2013

Investing: How to Lower the Risk, part 1


Investing: How to Lower the Risk, part 1

By Keith Bunn Jr.
April 14, 2013

Knowledge and Diversification

I learned a few weeks back that a family member lost a lot of money in their investments during the Great Recession. I don't know all the facts and figures of it all, but from what I was told, it sounded like they were not diversified enough in the market. 
You see, when it comes to investing, if you want to lower the risk of losing your money, you need two things on your side, knowledge and diversification. First, you need knowledge, meaning you need to know all the ins and outs of the investment you're thinking of getting into to the point you can explain it to someone else and they get it. When you have that kind of knowledge, you will know what kinds of investments are too risky for you. Second, you need to be diversified. Diversified simply means to spread around. Have you ever heard the old saying, "Don't put all your eggs in one basket."? Essentially, that's what diversification means. Don't put all your money in one type of investment. Simply because if the market goes down and you have the majority of your money invested in one company stock, you have a greater risk of losing all your money. Now if your investments are spread around several different types of investments and the market goes down, you will more than likely still lose some money. But while some of your investments may have dropped quite a bit, others may have dropped slightly or stayed the same and you didn't lose your shirt in the market.

Leave it Alone!

There is one more thing you need to know, and need to do if you're going to start investing that is just as important as having knowledge and diversification and that is you need to leave your investments alone. You have to think long term when it comes to investing. You have to understand that the market goes up and down like a yo-yo and if you pull your money out because you freaked out when the market went down then you're just throwing money out the window.

In part 2, I will go over with you the different types of investments you can get into. Which ones are good and which ones aren't (in my opinion that is. LOL)

Questions

1) It is important to have knowledge and diversification in your workplace retirement plans as well. Do you feel you have sufficient knowledge and diversification in those plans as well as in the open market?

2) When the market took a big hit during the Great Recession, did you freak out and pulled your money out of the market or did you remain calm and keep it in?

The main reason I'm doing all this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at cavuscoaching@gmail.com. For more money news, facts and ideas follow me on Facebook, or Twitter. Thank you!