What Do You Want From Your Investments |
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By: Mika Hamilton Posted: 2006-10-11 23:03:06 |
| There are three fundamental qualities you need to seek in your investments – income, growth, and safety. Every potential investment vehicle can be placed into one of these categories. There is a possibility that one particular type of stock could have two of these characteristics but, for the most part, each characteristic comes at the expense of the others.Safety: In investing there is no venture which is absolutely secure and safe. However, through the utilization of stable and long term investment funds you can almost be guaranteed a specific rate of return. Stable investment vehicles include mutual funds, government issues securities, and corporate bonds.These options are great ways to secure your principal, or original investment, and still have a constant rate of return over a long period of time. It is important to keep in mind that unlike mutual funds and money market accounts, bonds are not always stable and low risk. They vary from extremely stable corporate bonds to junk bonds which are high risk.Income: Safe investments also have the lowest rate of return. This means that if you want to make a substantial income, you will have to sacrifice some safety. Higher risk investments should be considered while you are in the prime earning years of your life.It is during this time you are going to have the most disposable income and therefore more money to invest. If you should happen to pick a bad investment, you have plenty of time to recoup the loss. On the other hand, a retired person must keep his assets safe because he draws a monthly income from his investment portfolio.Capital Growth: This is an increase of your original investment that is higher then the purchase price. For example a house, or any real estate, will increase in value over time. The profit from capital growth is not realized until after it has been sold. Capital gains can be short term (1 year or less) or it can be long term. Another benefit of capital gains is that it is taxed as a lower rate then your normal income. The reason for the lower tax bracket is to encourage people to invest in the economy.The three most important qualities you want in your investments is capital growth, income, and safety. Most financial professionals suggest that a well balanced investment portfolio will have investments of all three types. |
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