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Making sound investments: a brief guidance

Date Added: January 28, 2010 09:32:42 PM
Author: uidk201022
Category: Cooperatives: Financial Services
There are many types of investment. Broadly, they are classified into four groups: short-term deposits, bonds, property, stocks. Within each asset group there are investments to suit different kinds of risk, duration, returns and liquidity. There are also diverse ways of investing. You can choose the 'do-it-on your own' scheme and make an investment in more than one asset classes. Or, you can make an investment in a managed fund where specialists make a full range of investment decisions for you.1. Short-term depositsA) Bank savings accountsThe simplest form of short-term investment is a bank savings account. Returns are lower in comparison to other investments, but returns are guaranteed by the bank. You can withdraw a part or the whole sum whenever you want (total liquidity). This makes these investments suitable for short-term savings goals, or as a place to keep your emergency fund.B) Fixed term investmentsYou put a sum of money in a bank for a set period of time. In return, you get a higher interest rate than you can receive from a savings account. If you withdraw your money, the interest will be lower.2. BondsBonds are issued by the government or a company. You give them money for a fixed term, and they promise to pay a fixed interest and pay you bank at maturity. Although bonds lock your money away for a specified period of time, they can be at times traded.3. PropertyInvesting in property can be profitable, providing it is properly managed. Property investments can be direct and indirect.A) Direct property investmentIf you decide on a direct property investment, you can handle the everyday management of your property yourself, or use a property management company to do it for you. A property management firm finds tenants, collects the rent etc. The fees charged for these services are usually a percentage of the rental income.B) Indirect property investmentFor an indirect property investment, you can invest in a private superannuation pattern or managed fund that invests some of your sum in property. This kind of investment makes it simpler for an investor to benefit from diversification.4. StocksBy investing in stocks of a corporation listed on a stock exchange you get the right to share the future income and value of that firm. The return comes either in the form of dividends or in the form of capital gains. Difinitely, shares can also drop in value.Before making an investment, check with your financial adviser.

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