Matthew Williams
FIN 340 Fundamentals of Investments
March 5, 2022
Professor Sina Rezaei
1-2 Journal
Short-term investments: A short-term investment according to the Corporate Finance
Institute are assets that can be converted to cash or sold within a short period of time which is
usually anywhere between 1 and 3 years (CFI, 2022). Short-term investment is typically one that
has minimal risk as it is for a short term but requires a bit of watching when buying and/or
selling short-term investments. When talking about money market mutual funds the Fidelity
Learning Center states "A money market mutual fund is a type of fixed income mutual fund that
invests in debt securities characterized by their short maturities and minimal credit risk (Fidelity,
n.d.). Another form of low-risk short-term investments is called a United States Treasury Bill.
According to Treasury Direct Treasury Bills are sold in terms ranging from a few days to 52
weeks and are usually sold at a discount and anything paid out at the end that is greater than the
purchase price is considered the interest earned on the treasury bills during the investment period
(Treasury Direct, 2021).
Stocks: A stock according to Ivestor.gov are a type of security that gives stockholders a
share in the ownership of a certain company which are in turn called equities (Investor.gov, n.d)
There are several different types of stocks and that includes both preferred and common stocks.
Preferred stocks according to Investor.gov "usually don't have voting rights but they receive
dividend payments before common stockholders do, and have priority over common
stockholders if the company goes bankrupt and its assets are liquidated (Invest.gov, n.d.)." In
retrospect, common stocks are stocks where shareholders can get together and vote on certain
things within the company as they are part owners as a shareholder. Common stockholders also
receive dividend payments as well. Both of these types of stocks carry risk and there will always
be risk associated with it as with stocks you have to worry about the depreciation of a company
as well as the worst-case scenario such as a company declaring bankruptcy and losing all value
for their shareholders.
Fixed income investments: According to the textbook by Lawrence Gitman, Michael
Joehnk, and Scott Smart, a fixed income investment are ones that "offer a periodic cash payment
that may be fixed in dollar terms or may vary according to a predetermined formula (Gitman,
Joehnk & Smart, 2017)." Fixed income investments can include things such as Bonds which are
meant to be a more long-term sort or investments. They tend to be in the range from 10 to 30
years according to Gitman, Joehnk, and Smart giving installment payments and once they mature
that is when you receive the initial money for the invested bond (2017). Fixed-income
investments such as corporate bonds can be risky as they are not always back by the U.s
government which means you are at the whim of the company not tanking and going under.
Most bonds, however, that