| Action Group - Action Financial Management - Investments | |
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Investments There is an important difference between saving and investing.
You should save for short-term goals, but you need to invest for
long-term goals. Saving is basically a form of postponing
consumption. Passbook accounts, money markets or short-term
certificates of deposit (CDs) are good places to save for
short-term needs such as family vacations, a new car or
emergencies. You usually won't earn much on these types of
investments, but you can get to the money quickly, easily and
with little or no chance of loss of principal.
(Unlike
other investments such as stocks, bonds, and mutual funds, CDs are insured
by the FDIC)For long-term goals such as retirement or college education, you need to invest in assets that historically have earned higher rates of return, such as stocks and bonds. For example, if you deposit $1,000 in a passbook savings account and leave it there for 20 years earning 3-percent (These rates of return are for illustrative purposes only and are not indicative of any particular Investment; your results will very) interest, the account will grow to $1,806 (not taking into account taxes). If you invest it at 6 percent (These rates of return are for illustrative purposes only and are not indicative of any particular Investment; your results will very) in a Treasury bond, the account will grow to $3,207 in 20 years. But if you invest in, say, a mutual fund or a diversified portfolio of common stocks that earn an average 10 percent (These rates of return are for illustrative purposes only and are not indicative of any particular Investment; your results will very) a year, the same $1,000 would grow to $6,738! |
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191 North Avenue, Mount Clemens, MI
48043 |