What are the advantages and disadvantages of saving or investing in these?

5:49 pm on December 1, 2009 | 1 Permalink | Reply
Tags: mutual fund (844), mutual funds (729), stocks (1,376)

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  PoliPino 5:49 pm on December 1, 2009 Permalink
  

  Stocks:
  Advantages – potential for best gains.
  Disadvantages – highest risk

  Mutual Funds:
  Advantages – Still high potential for gain with much less risk than single stock. With a single mutual fund you can have a very diversified portfolio.
  Disadvantages – Expenses generally higher than stocks; many have minimum investment requirements.

  Life insurance – in order to really consider this an investment, you would have to go with Whole life insurance. Term life pays nothing once you cancel the policy, so it’s not really an investment any more than Auto or homeowners insurance.
  Advantages – Generally a safe investment
  Disadvantages – Whole life policies can have expensive premiums; returns usually lower than mutual funds or stocks.

  CDs:
  Advantages – Most are federally insured up to a point. Make sure you get a CD that is FDIC insured (or NCUA insured if you get it from a credit union). Even if the bank becomes insolvent, your money, up to $250K, is federally insured.
  Disadvantages – Low return; if you need to withdraw the money before the CD matures, there is usually a penalty – generally a few months worth of interest.

  Savings bonds:
  Advantages: Backed by the full faith of the US government. Unless the US government dissolves, your money is safe.
  Disadvantages – worst return. In fact, right now US bonds are yielding 0%. Even in good times, Savings bonds offer very low interest generally.

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