Module One
Qian Wang
Southern New Hampshire University
FIN-340: Fundamental Investments
Professor Fernando Patterson, Ph.D
May 2, 2022
Short-term investments usually have a life of under 5 years, and easily can convert to
cash, compared with long-term investments. This is also called temporary investment.
Short-term usually has lower risk most investors will put their idle cash in there and let it
slowly grow, for example, deposit accounts, and T-bills are all considered a short-term
investment.
a) Money Market Mutual Funds also called money funds, are fixed-income mutual funds
that invest in debt securities characterized by short maturities and minimal credit risk
(FIDELITY LEARNING CENTER, n.d.). Mutual funds usually have a relatively higher
return than some sort of benchmark.
b) United States Treasury Bills are usually issued in terms ranging from a few days to
weeks. It is a short-term investment issued by the government and supported by the U.S
treasury department. T-bills are also considered risk-free investments.
Stock, the definition of Stock investment from our textbook, is "a type of investment that
represents ownership in a corporation" (Smart et al., 2016). Stocks don't have a
guaranteed return rate; stock price is based on the company's business conditions,
inflations, and general finance market. Investors could lose money based on different
situations. Preferred stock is issued by the stock company in the distribution of dividends
and residual property than common shares with priority differences in the amount of
income is different, dividend distribution sequence is different, the scope of rights is
different, different resale provisions. Preferred stock usually has a predetermined
dividend yield. Preferred stock has a fixed dividend, does not fluctuate with the
company's performance, and can receive dividends before common shareholders; There
is no upper and lower limit on dividend income of common stock, depending on the
company's operating conditions and the size of profits
a) Fixed Income, according to our textbook, "Fixed income makes fixed cash payments at
regular intervals." (Smart et al., 2016) The common ones are Bonds, Preferred stock
Bonds are long-term investments, usually issued by governments or corporations.
Corporate bonds are riskier because they are not fully issued by the U.S government. But
most of the time they do have higher returns. However, bonds are less risky than stocks,
when the interest rates fall, bond prices rise, and when inflation increases, bonds also will
have an opposite trend, going downwards.
Other common investments would be ETFs and Mutual Funds. These two are really
similar in certain respects, but they also have differences. Mutual Funds are an
investment vehicle that brings together the funds of a group of people to co-invest in
stocks, bonds, and other securities, and the investors of a mutual fund own a portion of
the fund. Mutual funds have no specific investment object and allow fund managers to
mix investments within their portfolios to improve portfolio returns while reducing risk
ETFs can be traded like a stock, but it is also a type of group investment like mutual
funds. All funds have so