FIN 340 Module One Journal
Short-term investments are typically investments that are growing for several months or
years and that can be cashed in for complete value once matured. Short-term investments
carry some risk. Depending on your tax bracket there is a greater tax rate plus charges
that can be incurred such as commission charges for brokerage, transaction fees for actual
trade. Inflation could also be a short-term investment risk and not a guarantee of
profitability for your investment.
Money Market Mutual funds in the money market are a sort of mutual fund, only
investing in debt-based securities with a short life of 13 or less months and
elevated liquidity and lower risk. Money Market Mutual Funds are mutual funds
that invest solely in short-term investments (Smart, et al., 2019). The advantages
of investing in a money market reciprocal fund are greater than a typical savings
account and are highly flexible and liquid.
The US Treasury bills (T-bills) are a short-term duty in respect of debt that is
essentially written by the Treasury Department for you. T-bills are awarded at a
reduction level of less than one year with interest rates of more than one year.
Because the US Treasury supports T-Bills, they face a low danger. Bidders pay
more than their face value when supply is high and bidders pay less than their
face value when supply is lower. At term investors get paid face value plus
interest earned (Treasury Bills, n.d.).
Stocks are shares owned by shareholders that have been issued by a corporation and the
corporation owns the assets. Companies issue these stocks to raise capital in order to
grow the business. Stocks can be risky as its no guarantee that it will provide a return in
dividends or prices will go up. There's also no guarantee the company will stay in
business. Common stock is shares of a company that do not guarantee a dividend and
have more risk and volatility than preferred shares. Common stock holders have the
benefit of providing shareholders with the right to vote for the board of directors as well
as on issues that come before the board at the annual meeting of shareholders. Preferred
stock, is different because these shareholders have a guaranteed a dividend if one is
declared, but does not have voting rights.
Fixed income investments are investments securities include CDs, preferred stocks, and
cooperate bonds. Fixed income investments don't carry a high risk but with these lower
risks means lower returns. A bond is an interest-bearing security that obligates the issuer
to pay the bondholder a specified sum of money, usually at specific intervals (known as a
coupon), and to repay the principal amount of the loan at maturity. Zero-coupon bonds
pay both the imputed interest and the principal at maturity. Advantages of investing in
bonds include diversification, regular income, potential tax benefits and preservation of
principal. Risks associated with bonds include decrease of interest rate, inflation, market
and credit.
A mutual fund is an enterprise tha