Investment Articles

The purpose of a growth investment is to grow your capital over a period of time, allowing you to take away a larger pot of money than you started with. However, it’s not always as simple as that and there will be an element of risk to your funds, but investing for growth can prove to be a very satisfying way to make your money work harder.

A quick word on risk:

Generally speaking the higher the level of risk involved in your chosen investment the higher the rate of interest you are likely to see. Some investments will be more risky than others and you should think carefully about the level of risk you can afford to take before you start investing.

Five Steps:

1) Choose wisely. There are a number of different ways you can invest to generate capital growth from putting your money into an ISA to investing in stocks. Do some research and find the option that best suits you and your attitude to risk.

2) Keep track. Don’t let your money simply sit in a low interest account and gather dust. It can be all to easy to lose track of capital, so keep an eye on yours to ensure its working at optimum level. Remember that if the account your cash is sitting in doesn’t even keep up with inflation it can mean that you lose out in real terms, and your capital is in fact shrinking.

3) Commit. Investment for capital growth tends to be a mid-long term investment option so be prepared and wait it out. Investing for capital growth will often also mean that you need to sacrifice accessibility, so make sure you factor this in when planning your investment. Don’t panic if you don’t see much growth straight away, the longer you are able to leave your money invested the greater the chance that you will some capital gains.

4) Diversify. Diversification across a range of asset classes can help reduce risk of capital loss, so although your capital may not grow as fast it is likely that you will see a more steady rate of growth over time.

5) Get started! The sooner you get started the sooner you can get your capital working for you.

The world of investment can be complex, with a wide variety of opportunities available from share dealing to bond investment. Take your time finding the right option for your needs, if you still unsure you might want to seek professional advice from an expert in the field.

John T Hughes writes for Share Dealing Account, a leading online source of information on share dealing accounts in the UK.

What is investing?

Fewer people know what investing is than one would think. Even fewer actually practice it in the real world. To define what investing is I like to refer to probably the most successful investor of his time Benjamin Graham. His protégé Warren Buffet is the richest investor (per circa 2011) in the World.

In “The Intelligent Investor” by Benjamin Graham he makes the distinction between investing and speculation. “An investment is an operation which through personal analysis promises safety of principal and an adequate return. Operations that do not meet these requirements are speculative.”

In simple terms, any investment you make as an individual that does not analyse and promise strong reasonable protection from risk and have a good return on investment is not an investment but speculation.

From the above definition it is clear that the financial collapse that happened over the last 4 years to some of the biggest world investment institution shows that some of the so called “experts” were doing nothing more than speculating rather than investing with the public’s money.

What is Your Style of Investing?

Once you have an understanding of what differentiates an investor from a speculator it is a good idea to understand what style of investing you will be using.

As you can probably tell I along with Warren Buffet to be fair am a great fan of Benjamin Graham’s rules. Graham states that there are 2 main types of Investors:

-Defensive Investors; Invest in a manner that stresses safety of investment, although still looking for return of investment

-Offensive/Aggressive Investors; investing in a way that looks primarily at potential high returns of investment but must also balance this with reasonable safety

For more detailed advice on what both Defensive and Aggressive investors should invest in read “The Intelligent Investor” by Benjamin Graham

It is worth noting that nobody is 100% defensive or 100% defensive but likely a mixture of the two. In “The Intelligent Investor” Graham talks about a 25%-75% bond investment and 25-75% common shares as a good defensive technique. The simplest option would be 50% in bonds and 50% in common stock. The more defensive you are the higher the bond % of investment would be.

If you do not understand the above just realise that bond investments are seen as “safer” investments (there is always risk)

You then have to decide which you are and choose your investments only when you are sure it is a good investment that fits your rules.

To learn more about investing, visit Learning Investor

Kapgwan

A well-planned investment always gives excellent returns over the years. Investing should be done for at least a period of five years and having a clear long-term plan is needed. A lot of people expect quick returns on their money and end up investing in risky investment options instead of the safe investments.

Safe Investment Options

Bank Saving Schemes

Bank saving schemes is one of the most popular amongst all the safe investment options. With bank saving schemes, the chances the money spent being misused are reduced compared to other forms of investment. Most importantly, it gives an attractive interest which is a requirement of liquid money for use when needed.

Gold

Gold would be the best investment as well as a safe investment. The prices of gold are based on the market situations. Buying gold at a lower price would give bigger profits at maximum levels when the demand for gold in the market is at its peak. Buying gold in electronic form is better than purchasing gold in the physical form. It is necessary to seek help and advice from gold traders and dealers to know more about its prices and make profitable investments.

Bonds

Bonds are one of the safe investments to consider because of its stable returns year after year. Bonds issued by public companies, as well as private companies, provide decent returns, regardless of the situation of the economy and markets. Ideally, one should prefer reputable government run companies for bond investments. Bonds are the loans advanced to corporations by the investors. Therefore, bonds would be safer form of investment compared to other forms of ventures.

Residential Real Estate

Residential real estate is also a sound venture because of the attractive prices of houses and properties. With the economy showing steady growth recently, buyers are starting to purchase homes. This can start an upward trending in the real estate prices. Investment in residential lots is also predicted to yield superior returns on investment in a later time to come. Benefits from residential real estate investment are expected to be in five to seven years.

Mutual Funds

Mutual funds are one of the save investments considering the variety of options investors get here. Large cap diversified mutual funds offers safety and steady growth of the investments. Several mutual funds give as high as twenty-two percent return on investments. Prior to investing, it is best to conduct a thorough research, so that one can choose the correct mutual funds companies.

For most of the first-time investors, the safe investment options would be the appropriate choice. As one starts to gain profits, investing in risky investment options would follow depending on one’s comfort and choice.

One year investment bonds can be used to produce a long term capital growth or to generate an income. These bonds are a good way of saving money because they have a fixed rate annually, and the access can be restricted for that period. Before I think of buying the bond, the first thing I would consider is security and whether I can be paid off the bond before maturity date.

Money grows and good returns are produced at the end of the year. To get the investment bond I must pay a minimum deposit and a fixed rate for one year. There is guaranteed returns and the interest is paid annually or monthly. In case I get an emergency, the bank can lend me some of the money although I will have to pay a small charge fee. The money is secure since it is protected and managed by professional investment managers. When compared with stock, the bond does not get much press thus, a better alternative method of investing. If I buy the bonds from the government or municipal bonds, I will enjoy the tax benefits that are quite attractive. It easy to get these investment bonds in the banks or over the internet, and they are commission free.

The best thing is to buy and hold on the bond investment until it matures because I will get paid exactly what I expected. One year investment bonds are safe and highly predictable. I would prefer to buy the bond directly from the government because if I buy through a broker I must pay a commission fee.

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In layman terms, bonds are investments with fixed rate of return, unlike equity shares. This explains why bonds are often referred to as ‘fixed-income securities.’ The return on investment, in this parlance, is known as ‘yield.’ In the real terms, though the token rate of interest payable on bonds is fixed, the yield tends to change with a number of factors, such as change in prevailing interest rates in the economy and inflation. Let us look at what are the three types of bond yields and what they signify.

Nominal Yield

Also known as the ‘coupon rate,’ it is the indicated rate of interest on the bond. The annual interest is calculated on the par value of the bond at the coupon rate. It is immaterial whether you purchased the bond at premium (more than par value) or at a discount (less than par value) – the nominal yield always concerns with the par value. For instance, 7% $250 Notes imply that 7% coupon rate is payable on $250, even if you bought the Notes at, say, $280.

Current Yield

Current yield is the current percentage return on the security. It assumes the holder will keep the security only over the next one year and during that period there will be no change in its market price. In effect, it does not refer to the ‘total yield’ up to the time of maturity. It also eliminates the assumption of reinvesting the periodic receipts at a constant rate. It can be represented in the form of a form of a formula, as below:

Current Yield = Nominal Yield/Market Price

This percentage indicates the actual return if you decide to purchase the bond at current market price.

Yield-to-Maturity

Yield-to-Maturity refers to the total return over the life of the security. Theoretically, it implies reinvestment of the annual interest receipts at a constant rate. It is considered the most important parameter to assess the viability of a bond investment. However, the calculation for YTM is rather complex that relies on a ‘trial and error method’ or the aid of some calculating device. The concept can be expressed mathematically, as:

N (1+R)-1 + N (1+R)-2 +….. N (1+R)-n + P (1+R)-n = M

where

C ≈ Annual Coupon Interest or Nominal Yield;

R ≈ Yield-to-Maturity;

P ≈ Par Value or Redemption Value;

n ≈ Years left for maturity;

M ≈ Price of the bond;

It is interesting to note that if and only if a bond is selling at par, the three yields are equal.

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Would you like to know the high income investments strategy? Probably, all would be interested in it. You need to make your investment options strong enough to support you during the times, when you are helpless. For this, it is very important to learn investing in the right way. Just investment in any option available is not a good choice. You should know in what you are investing, its time period, its pros and cons, etc. considering all the above factors, one can go for investment option that is most feasible and suitable to him.

There is an assortment of investment strategies available, however you need to simplify them and evaluate it in order tom comprehend whether it is for you or not. In order to make high income investments sensible option, you need to acquire a firm grasp of some of then noticeable features of investments. These include income, growth, safety, liquidity, and tax benefits. Each investment options have to be evaluated by rating it in terms of these features.

Get hold on bonds and stocks. These are the huge high income investments options that each individual should understand while investing their capital into it. Basically, stock investment is directed to people who desire to expand with flexibility. In case, you desire high income and safety, then bond investment is the preferable choice for you.

You can speed on liquid and safe investments such as bank money market accounts and money market securities. All the investment portfolios should boast bonds, stocks and liquid safe assets. You can also spread your hands into alternative high income investments such as oil, gas, gold, real estate and other such tangibles, products or commodities. You can also go for foreign securities as high income investments. Such investment options can generate growth for the investors when the condition of the stock market is not good.

Then, you need to also focus on the concept of mutual funds. It is quite easy as you can now comprehend the kinds of investments in which these funds invest their sum. Mutual funds administers your money for you, however, it is important to select a good fund. You are provided with some basic alternatives such as balanced funds, stock funds, money market funds, bond funds, etc.

The ultimate step is to invest in a concept wherein you can administer and maintain a balanced portfolio of your investments; however at your own risk. You have to expertise in investing concepts and tools such as balance, rebalance, asset allocation and averaging dollar expense. If all these steps are followed properly, you find the investment option very easy and manageable. Or else, you will just remain confused and lost in this cycle of investment. If you are interested to know more about high income investments, then you can visit cash value life insurance for further details and assistance. High income investments are very necessary and mandatory in today’s world because one can never predict what can happen tomorrow.

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You want to invest money in bonds in 2011 and earmark $10,000 to earn higher interest than your bank offers. Your best bond investment would be a bond fund because here you get diversification and professional management… for a price. Before you call a financial planner and rush into things, it’s best to know where to invest to get the best bond fund for your money.

If you invest $10,000 in the wrong bond fund in 2011 you could lose money in 4 different ways. First, up-front sales charges could eat up a few hundred dollars. Second, yearly fund expenses could cost you money every year to the tune of a couple hundred. Third, you could be talked into putting money into a risky bond fund. Fourth, even the best bond fund could lose money in 2011 and beyond. The first 3 money mistakes can easily be avoided.

Let’s start with the money basics. People invest in a bond fund to earn greater interest income, not to make their money grow. That’s what a stock fund is for. In the prevailing interest rate environment don’t expect more than 5% a year in interest income (dividends) for 2011 from even the best bond fund. We’ll describe the best fund later. For now focus on the 5% (or less) you might earn and the cost of investing mentioned above. A 3% to 4% sales charge and expenses of 1% to 2% the first year means that you give back your interest income for 2011. There is NO good reason to do this.

Now let’s look at the third way to lose money. Why would a securities salesman who calls himself a financial planner talk you into a riskier bond fund? He wants your money so he can make a commission. If he talks 7% or 8% vs. 3% or 4%… you are more likely to invest money with him and not pay attention to what it is costing you to invest. There are basically two ways you can earn significantly higher interest income in a bond fund, and both increase your risk. One, you can sacrifice quality. Two, you can go with a long-term fund that holds debt securities with average maturities of 20 years or more.

When you combine both lower quality and long-term maturities you get the best bond fund yields, or highest interest income potential. You also get more risk than you probably bargained for. Low quality increases the likelihood of default: interest and principal payments may not be paid by some of the issues in the bond portfolio. Long-term issues that mature in 20 or more years are the biggest risk in today’s low interest rate environment. When you invest money in a long-term bond fund you will live with higher “interest rate risk” than the best bond fund for 2011 has.

Here’s how to picture interest rate risk. A bond fund holds hundreds of debt securities and each pays a fixed interest income that never changes for the life of the security. Upon maturity interest payments stop and the owner (in this case the fund you invest money in) is paid back the principal that was borrowed. Now picture what happens to the value of these debt securities (that trade in the market like stocks do) when interest rates in general zoom upward. The price or value FALLS to adjust for the fact that higher rates are now available elsewhere. That’s interest rate risk and it applies to all marketable debt securities.

If you invest money in a fund that holds short-term maturities you won’t be greatly affected. But a bond fund that holds 20 or 25 year maturities will get clobbered when interest rates rise significantly. It’s got low interest rates locked in for many years, and the price (value) of their holdings will fall to adjust for this. If you have your $10,000 invested with them, you lose money. This is not the place to invest money in 2011, with interest rates near all-time lows.

Here’s where to invest money: the best bond fund for 2011 and beyond. You’ll cut costs, which directly increases the money you make and keep. You’ll also lower your risk. Some major no-load fund companies offer NO sales charges AND low yearly expenses. To get the best fund for you money put your $10,000 in a BOND INDEX FUND, where your total cost to invest can be less than ½% a year. To keep risk moderate while earning a respectable interest income go with a medium to high quality fund that invests in corporate bonds. Go intermediate-term, with an average maturity of 5 to 7 years.

Where do you find all of the above? Go to the websites of the largest no-load fund companies: Vanguard, Fidelity, and T Rowe Price. What exactly do you want to invest your money in? The best bond fund for 2011, which is: A no-load, medium to high quality, intermediate-term, BOND INDEX FUND. When ready to invest just call the fund company of your choice toll-free and explain that you have $10,000 to invest in the above fund. They’ll gladly help you invest your money, and will give you good service in the future as well.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

You can learn to invest in 2010 or you can invest with the crowd. Invest like most folks and you might not be a happy camper. Here’s why now is the time to learn to invest. Consider what follows to be your personal financial stimulus package for getting up to speed and on your way to financial success… with a financial education.

There are two basic reasons you need to learn to invest in 2010. First, the gravy train is over. Your employer and your government have their own problems and can not afford to guarantee your financial future. Second, it will not be easy to make money investing in the future. Uncle Sam is up to his eyeballs in debt and major corporations are fighting to grow sales and profits in a new competitive world economy. The future of Social Security is suspect, and traditional pension plans are going by the wayside.

Today it’s a matter of: learn to invest your own money in a contributory retirement plan or an IRA if you work for a living. If you’re older, it’s learn to invest what money you have stashed away or suffer the consequences. In the world of investing money today there is no longer a good safe place to hide and ignore the economy and the markets, because interest rates are near all-time lows. That’s a sword that swings both ways. If you seek the safety of fixed investments like CDs you earn little interest. Try to make money investing in riskier investments like stocks, bonds and real estate and you’re asking for trouble without a financial education.

Our government has been holding interest rates down to stimulate a lackluster economy. Sooner or later rates will rise and inflation will likely follow. Will future higher interest rates give the safety-minded a good safe place to park money? Not if inflation rises to offset the gain in interest rates. Will stocks and real estate be good investments? Only if the economy improves and people can find jobs and pay their bills. And what about bonds?

Bonds will be a guaranteed loser when interest rates and inflation take off. And that’s a problem for the millions of investors who hold bond funds, including those who fled other investments in search of the relative safety and higher interest income offered (under normal circumstances) by bond investments. The problem with the higher interest income from bonds is that it is FIXED for the life of the bond. As the interest rate goes up for new bond issues, the value of existing bond investments will fall as they become less attractive.

Now, do you really want to face the above scenario without a financial education? Even if you have a financial planner? If you plan to invest in 2010 and beyond do yourself a favor and learn to invest, starting with investment basics. Once you understand the investment basics of stocks, bonds, mutual funds, real estate and other alternative investments you’re ready to tackle the investing aspect. Your ultimate goal: putting together a sound investment strategy, with asset allocation and proven investing tools like balance & rebalance and dollar cost averaging working for you.

Without a sound investment strategy you are investing with the crowd, uninformed. The crowd did not make money investing last decade. They lost money and are likely in for more of the same in the future with the threats of higher interest rates and inflation lurking in the shadows. Be different, and get yourself and your level of financial education up to speed!

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

As a bond investor, one must thoroughly understand interest rates, the most basic feature of bonds. The value of a bond investment is very much dependent on today’s interest-rate environment and the potential future interest-rate moves.

Coupon Rate

Bonds as fixed income securities pay a set coupon rate, the rate used to calculate periodic interest payments on an issue. Two things affect the coupon rate: the issuer’s credit quality and the issue’s duration. In general, the better the credit quality and the shorter the duration, the lower the interest rate, and vice versa.

Yield

Unlike a coupon rate that stays constant, the actual yield(to maturity) on a bond fluctuates as the result of the changing supply and demand in the trading, any changes in current interest rates, as well as in the perception of future interest-rate moves. For an investor, the yield is the coupon payments relative to the purchase price of the bond, which changes over time for the same above-mentioned reasons. And a bond yield moves in opposite direction to the price.

As interest rates have come down so much in the last couple of years, bond prices have risen accordingly and that has been good for investors. But the question now is that if interest rates can’t drop much lower from today’s historical low, what would that bode for investors, especially when inflation expectation starts setting in? One has to think about possible dropping in bond values down the road.

Interest Rate Sensitivity: Short Term vs. Long Term

Investors care a lot about how much their bond holdings are sensitive to any interest-rate change, because moves in interest rates will be reflected in the changing of the bond prices, thus the value of their holdings. In a rate-tightening environment or a would-be one, longer-term bonds are more sensitive to rate increases. This is because such a potential bond holder would be locked up for too long at a lower coupon rate.

Now the investor would be unable to earn any ongoing higher rates, and thus would demand a higher yield by paying less when purchasing the bond, effectively driving down longer-term bond prices. Should there be a future tightening and should the tightening become progressive as the current economic recovery continues moving forward, there could very well be losses of value on longer-term bonds.

On the other hand, shorter-term bonds would be less influenced by upward moves in rates in terms of investors demanding a higher yield and thus there wouldn’t be much downward pressure on shorter-term bond prices. In fact, as investors contemplate whether interest rates will really go up, they would like to get into shorter-term bonds for the flexibility that shorter durations offer, potentially driving up shorter-term bond prices and delivering better returns for those shorter-term bond holders.

Investing in bonds is a lot about evaluating current interest rate environment and anticipating future interest rate moves.

Charles E. Johnson is an entrepreneur and the current owner of Articleportfolio.com. For more information on the bond market and investing in bonds, visit the Articleportfolio.com bonds page here: http://www.articleportfolio.com/buying-bonds.html.

We all make mistakes, however, it can be a costly one if you do not know what the Municipal Bond Rates are. There are many factors in these rates, and it is best to avoid any mistakes made, to make sure you have a good investment on you hands.

They don’t know what the ratings mean.

They see these groupings of letters, scratch their heads, and buy them anyways. They could have bought a bond with a bad rating on it, and wouldn’t even know the difference. Besides the fact that it wasn’t paying out when it was supposed to.

The best rating you can get is Triple A’s, and worst C. If you find yourself with a C rated bond, try to dump it, and recover some of your money, because this bond has been determined to have a very high risk of repayment.

They do not do their research on the city who issued the bond.

Some people just buy these bonds as if there is no risk involved. However, like any other kind of investments, there is always a risk.

To make sure you buy a good bond, do your research on the city that is issuing the bond. Make sure they have a positive growth, and a stable economy in place. If they lack any of these things, they will most likely have trouble paying back the loan (which is what a bond is).

Now that you have gone over these 2 mistakes, you will be able to make sure you have a good Municipal Bond Rates on your next investment. Make sure the city has a positive growth rate, and a stable economy to insure repayment on this debt. Without that, you will not know which will be your best investment. So do your own due diligence and read up, before you open your wallet.

Tired of making poor investment choices? Having trouble choosing the right bond to go with? To learn more about Municipal Bond Rates, and make that right bond investment, then you need to go to this website now http://municipalbondrates.org