Investment Plans

| November 5, 2011

There are basically five different types of investments and they are shares, property, bonds, short term deposits and IRAs. In each category of investment, there are risks, returns, liquidity and duration.

You have a choice when investing; you can invest directly in a particular category or you can invest in a managed fund where managers make many different kinds of decisions for you.

Let�s look at one investment plan, better known as short term deposits such as bank savings accounts and bank fixed term investments. Bank savings accounts returns are low but they are guaranteed by the bank. What makes this investment plan attractive is that you can withdraw any amount of money when you want or let your savings mount up. This type of investment plan is a great option if you want only a temporary savings goal or a savings plan to act as an emergency fund�at a time when a little extra money might come in handy. However, this plan is not wise for those seeking long term, reliable goals.

Then, there is what is called a bank fixed term investment. With this investment plan, you give the bank a set amount and make it for a certain amount of time�often a full year. Your money is locked in for that time period. What you get in return is a higher interest . If you withdraw your money, you will; however, receive a lower rate. Often this kind of investment is good for medium and short investments.

Bonds are still another way to invest your money. A bond is issued by the government or a company and resembles an IOU. What happens when you purchase a bond is that you give them a certain amount of money for a period of time and in return they promise to give you a certain interest rate and then repay you when your bond has matured. Bonds are a locked in kind of investment but there are opportunities, if wanted, to be traded.

Property is another form of investment but it is important not to become emotional involved when investing in this area. It is suggested that if you�re thinking of investing in property to first calculate how much of your net worth will be invested in property. If however, you own property that is rented to others, this can be profitable due to the returns that will come from the investment and the value of the property that will increase as the years go by.

Next, investing in managed funds is another way to invest funds. Managed funds are when your money is combined with other investors and where a professional fund manager invests that money in a variety of investments. Managed funds come in several different forms. Some managed funds seek high growth and invest in high risk shares while other funds seek solid, steady growth that come from shares and deposits. A plus factor with managed funds is that managed funds allow the investor to reach markets that are sometimes difficult to access.

Finally, there are IRAs. IRAs are investments that are specifically designed for retirement savings and work well for many because it has several tax features that are quite helpful. IRAs are tax-deferred. What this means is that the earnings from an IRA are not taxed each year. The earnings are reinvested for the sole purpose of continued growth. And, with IRAs you have the ability to deduct contributions from income that are taxable.

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Category: Investment

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