This week will be de-skilling of the major investment types and their unique characteristics. There are only so many investment types but yet it all manages to sound so complex. Financial jargon if you may. But we are here to break it all down for you.
Changing your spending habits so you can set aside money to invest may not seem so easy at first, but the benefits and the opportunity to improve your future makes it worth it.
Bonds are generally under fixed-income securities and is commonly used to refer to any securities that are founded on debt.
When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money and eventually pay you back the amount you lent out.
The main attraction of bonds is their relative safety. You hear people make comments like “My bond investment will never go bad because I know the government can never crash”. If you are buying bonds from a stable government, your investment is virtually guaranteed, or risk-free. The safety and stability, however, come at a cost. Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities.
Stocks entitle you to become a part owner of the business in which you purchase. This entitles you to vote at the shareholders’ meeting and allows you to receive any profits that the company allocates to its owners. These profits are referred to as dividends.
While bonds provide a steady stream of income, stocks are more volatile. That is, they fluctuate in value on a daily basis. When you buy a stock, you aren’t guaranteed anything. Many stocks don’t even pay dividends, in which case, the only way that you can make money is if the stock increases in value – which might not happen.
A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you.
The primary advantage of a mutual fund is that you can invest your money without the time or the experience that are often needed to choose a sound investment. Theoretically, you should get a better return by giving your money to a professional than you would if you were to choose investments yourself.
FBNQuest Asset Management, provides several investment options and you can start with investing as little as N5, 000 in a mutual fund.
Extra income source
Better than a savings account
Potential for long term returns
Grow your wealth
Reach your financial goals
Save for retirement