After posting my new blog yesterday. I got an email from a friend inquiring from me about investing in the stock market. I gave her a brief description about what it is and a simple 'how to start.'
Her inquiries made me decided to blog about the different kinds of investments where we can put our hard earned money in. Again, I am not talking about scams, or MLM. Speaking of scam, it is still a sad thing to remember the victims of Aman Futures Group in the Visayas and Mindanao area of the Philippines. Some families used up all their hard earned savings to put in an investment only to loose them all! Some of them even loaned some money thinking they will make more only to get them into debt that is very hard to come out of.
Following Sunday after the news, the LDS church in the Philippines received a letter coming from our area authorities. We are encouraged to bank on our financial learning so that we will not be a victim of fraudulent financial activities, and that
Bonds (Low Risk)
If you are not a high risk person, investing in bonds is for you. Bonds are securities founded on debt. Purchasing a bond is like lending your money to a company or the government. They will in turn promise to pay you the interest for however much you lent them and then pay you back all the money you lent them.
However, one who invest in bonds cannot exactly say that there is safety nor stability in it. It is because the risk is very low, and therefore the Rate of Return is also low.
Stocks (High Risk)
Purchasing Stocks makes you a part owner of a certain company listed in the stock market. It has it's perks of entitlement. As a stock holder, or a shareholder , you'll have the opportunity to vote at meetings for the shareholders and receive profits that the company might have (dividends).
While bonds can produce steady income stream, stocks is the opposite. It is volatile. Though it can provide high returns, it can put an investor at a high risk of loosing some or all of his invested money. The fluctuation of value in the stock prices are very rapid and there are two ways to earn. 1. Is if the stock you bough increased in value 2. ...as we mentioned earlier, through a dividend. (Some companies don't pay any dividends at all).
Mutual Funds (Medium Risk)
If your risk appetite is set to medium, mutual funds will be beneficial for you. This is a collection of stocks and bonds. Buying a mutual fund, means that you with the other mutual fund investors are pooling money that will let you pay a professional to manage or select the securities for you.
Depending on the mutual fund company, they may pick securities that are mainly focused on certain financial vehicles whether it be large or small stocks, government or company bonds. These certain bonds may be coming from our country's industry, or abroad.
If you feel you are the person who does not have the time to learn about the stock market, go with mutual funds. This way you can let the real experts take charge instead of you having to face the risk of losing everything you've got.
Now that you have the idea, the responsibility is in your hands. While different kinds of investments do have their own risk factor, we need to determine our appetite for risk. This way, we can avoid the pitfalls of being pushed to limits more than we can handle. Hope this blog will help you make sound decisions about where to invest your hard earned money.