Blue Flower

Investing can be easy if you stick to the basics. Don't become emotional. Use logic.

Basic - Low risk equals low return on your investments. High risk equals high return on your investments. Most investments are not risk free. Look for long term gains in known investment markets, not short term and risky trend markets. Have a well-rounded portfolio of investments and don't place all your money in one or a few investments. This will help lower the risk. Review your portfolio each week.

Low Risk to High Risk Investments:

  • Bank savings accounts and Certificates of Deposits (CD) are very low risk because the banks will insure your investment through the FDIC for $250,000. The annual percentage rate in today's economy might be 1% which is very low return. These are also the most liquid investments (with little or no penalty for withdrawing your funds).

  • Municipal Bonds are low risk because they are supporting City, County and State building projects like roads, schools, etc. Although they are not insured investments, the government can always raise taxes to cover any short falls. Remember when the City of Miami went bankrupt? The State stepped in, bailed out the City and the City became a City/County Miami Dade. The interest rates for Bonds vary on the economy and length of time you have to hold the investment. Bonds perform well when lending interest rates like house loans and car loans increase. The annual percentage rate in today's economy might be 6%. They are not liquid investments.

  • Annuities are lower risk investments typically backed by insurance companies. The companies use your money to invest in the stock and bond market at higher interest rates and try to guarantee you a future income stream. These investments are generally not insured. The broker commissions paid on these investments are usually more than other broker fees. The annual percentage rate in today's economy might be 6%. They are not liquid investments.

  • Commercial Bonds are similar to Municipal Bonds but they are investments issued by corporations. The corporations use your funds like a bank loan to build a new plant or store, research and develop a new product or acquire another business. These investments are generally not insured. The annual percentage rate in today's economy might be 6%. They are not liquid investments.

  • Stocks are investments in large companies like Wal-Mart, Johnson & Johnson, etc. You purchase the stock at the current market price and when the company does well your stock increases (Capital Gains). If stock dividends (current income) are paid you receive annual earnings based on company profit and other factors. For example: One share of Coca Cola might cost you $100 today but in two years the market price may go up to $125. If you sell this share you receive cash in the amount of $125 and $25 is considered Capital Gains subject to tax. It is only taxed when sold. It may also pay a quarterly dividend of $.50 for a total of $2 for the year. This $2 is taxed in the year received. These investments are not insured and are higher risk, but have potential for higher return on your investment. They can also go down and you could lose your entire investment. Stocks classified as Blue Chip means they are older known established companies generally with a less risky investment, good dividends and moderate growth. Start Up companies like a new tech company involve higher risk but may bring a much higher return (think of when Apple and Microsoft started) and then think of (Enron and Nextel). The annual percentage rate in today's economy might result in a 15% increase.

  • Mutual funds are stock and bond investments managed by a stock broker whose job is to get clients a good return on their investments. Brokers use your and several other client funds to purchase many different types of stock/bonds of low, moderate and high risk. This lowers your risk by spreading your investment into many companies. While one company may do poorly, another may do well. These investments are not insured. They can go up and they can go down, but all of your eggs are not in one basket. This is good diversification. The annual percentage rate in today's economy might result in a 15% increase. The Mutual Fund manager determines which stocks to buy and when to sell. You do not have control over the timing of Capital Gains and Dividends.

  • Private Investments and Partnerships are generally venture investments to start a new business concept or take advantage of a business opportunity. Think like Planet Hollywood and oil partnerships. UNLESS YOU KNOW THE PERSON VERY WELL AND CAN HOLD THE INVESTMENT IN YOUR HAND RUN AWAY FROM THE SALESPERSON AS FAST AS POSSIBLE!!! Planet Hollywood burned movie stars like Stallone and Bruce Willis. If You think the big oil companies are going to let you in on the oil profits, call me because I have some Florida Swamp Land you might want to buy!

Call us at (386)-668-3328 if you have any questions, and we will be glad to assist you.