Module One Journal
Samantha Sammartino
Southern New Hampshire University
FIN 340: Fundamentals of Investments
27 October 2021
Short-Term Investments
Short-term investments are assets that are liquid and can be sold or converted into cash.
typically within a year. While these investments are a way to make quick money, they require
some knowledge and time spent monitoring when to purchase/ sell, and high costs
Money market mutual funds are a popular, low risk short-term investment where
"investors buy shares in a fund, which in turn buys short-term government, bank or
corporate debt, such as U.S. Treasuries, certificates of deposit or commercial paper
(Voigt, 2019). Money market mutual funds can be purchased directly from a bank, from a
fund provider, such as Fidelity Investments or Vanguard, or investing through a brokerage
account. Typically, the minimum deposit amount for money market funds can be
anywhere from $500-$5,000+.
United States treasury bills is another low risk, short-term investment option,
where an investor lends the government money from a few days up to a year (52 weeks).
Treasury bills are bought at a discount, then upon maturity the government pays the
investor the full-face value, resulting in a profit. Treasury bills can be purchased from
TreasuryDirect, through a bank, or through a broker.
Stock
Stocks are an investment made in a company (or companies) and their profits. Investors
then can be paid dividends as the company's profits increase, and/ or sell their stocks for a profit
when the stock price appreciates. Common stock is where the investor owns a share in the
company's profits, may earn dividends, and has a right to vote. Preferred stock on the other hand.
has no voting rights, but is paid a fixed dividend before any common shareholders. Both types of
stocks have the risk of the stock price depreciating, or the company even going bankrupt.
Fixed Income
Fixed income is an investment, such as government and corporate bonds, that is focused
on "preservation of capital and income" (BlackRock, n.d.). Investors receive coupon payments of
a fixed amount regularly on their bond holdings. Some risks associated with fixed income are
that if interest rates rise bonds prices fall/ lose value, inflation risk, financial risk that an issuer
could default on their obligation, and the risk of not being able to find a buyer if an investor
wants to sell. "Individuals can invest in fixed income through mutual funds and exchange traded
funds (BlackRock, n.d.).
Other
Mutual funds and exchange-traded funds (ETF) are professional diversified portfolio
collections of stocks and/ or bonds. An individual's investment represents their ownership part
"in the fund and the income it generates" (Investor.gov, n.d.). Individuals can invest in mutual
funds and ETFs with 401(k)s, directly from the fund company, such as Vanguard or BlackRock
or through and online brokerage. Some advantages of mutual funds are the professional
management, convenience, and diversification. Some disadvantages of mutual funds are high
fees, only traded once a day, and "distributions are taxed at either ordinary income rates or
capital gain