How can you assess your comfort level for stock? Investing first consider your own personal view of risk. If your stock portfolio went up or down in price 20 percent in one year, is that something you could live with, if not how about 10 percent? Think of your own comfort level, once you decide on risk, have a financial advisor design, a portfolio that fits your personal risk tolerance.
You should also consider your age and the timeframe for your investing the longer you have to invest the more time you have to make up for stock price declines say that you're 30 years old you plan to work until age 65. You can afford to take more risk by investing in equities. If you suffered losses, you have many years to make up for those losses. As investors get closer to retirement, they typically move funds out of stocks and into other less volatile investments. Like bonds, bonds represent debt issued by corporations and municipalities like cities and states, investors buy bonds. The bond issuers say Microsoft agrees to two types of payments. First, Microsoft agrees to pay the investor interest each year, usually twice a year. The bond issuer also agrees to repay your original amount, invested on a specific future date called a maturity date. Your original investment is referred to as the principal amount. All of these details are stated in a written document called a bond indenture okay. So why would an investor purchase a bond? Well, a bond offers a more predictable rate of return than buying a stock assume that you buy a $ 10,000 6 % bond due in 10 years. You'Ll receive 6 % interest on your $ 10,000 each year. That $ 600 will be paid in two installments of $ 300. Each you'll also receive your original $ 10,000 investment at the end of 10 years. Here'S a key point: if you hold the bond until maturity in 10 years, you know you'll get $ 600 in annual interest and that your $ 10,000 will be returned at maturity. A bond rating is just like reviewing an individual's credit report. The rating is based on whether or not the bond issuer repays interest in principal on time. A bond rating also takes into account how much total debt the corporation has outstanding. A higher bond rating means that the issuer is more likely to make all require payments on time. A higher bond rating also means that the corporation can issue bonds at a lower interest rate. Investors are willing to accept a lower interest rate in exchange for a higher bond rating. Some investors purchase bonds with a lower bond rating. While these purchasers are in a higher interest rate, there is also a risk that the in issuer will not pay principal or interest on time. So how does bond investing fit into your investment plans? Most investors buy a combination of stocks. Stocks offer a higher potential rate of return, but also involve more risk of price decline. Bonds offer more certainty. Your mix of stocks and bonds in your investment portfolio should change over time. Young investors will invest more in stocks and lessen bonds. If stocks in the portfolio decline in price, the young investor has more time to make up for those losses. As investors get older and closer to retirement, they will shift more of their investment dollars into bonds. Most investors want a more predictable return on their investment dollars. As they get closer to retirement, using what you've learned play around with those investment tools and see what portfolios you can come up with and what works for you, you
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AuthorKathleen Milburn is an award-winning American poet, novelist and essayist. She is also a teacher in New York University. Kathleen is also a witer at Robot Don Student Essay Checker service. ArchivesCategories |