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Safe Investments for Your Money
Are you someone who is a beginner when it comes to investments? Do you have enough money to use as investment? Are you earning enough every month so that you can save a little money for your future? Are you willing to save money for your future? If your answer to all of these is a resounding yes and you don’t know what to do with your money, then here are a few investment vehicles where you can park your money so your earnings don’t go to waste. Saving money is very important and learning how to take care of your own money is a step towards a more stable future.
The Importance of Saving Money
It can be shocking when you learn about someone who earned a lot of money in the past but couldn’t even make ends meet nowadays. It is more than likely because they never learned how to save their money while they were still earning. And no matter how much you earn now, if you don’t know how to save them, they are bound to disappear in the future.
For people who don’t know anything about investments, their investments consist of buying jewelries and other items that do not depreciate its value. Sure, it can be a good investment tool but the problem with this kind of investment is that jewelries and other investment items are easy to steal. Once they are stolen, your investment is gone. Other people have piggy banks where they can save their money. Again, piggy banks and saving your money at home are always at risk of being stolen.
You would want an investment that is safe, an investment where you can easily use your money whenever you need it. Here is a list of some of the safest investment vehicles where you can protect your money without it being stolen. These investments are considered to be safe and you know that whatever you have earned, they are well protected. Just make sure that you are saving your money in reputable and trusted banks and investments companies.
Certificates of Deposit (also called Term Deposit or Time Deposit)
A certificate of deposit gives a slightly higher interest rate than a savings account. However, your money in a certificate of deposit may not be as liquid as a savings account. Placing money in it requires you to wait for the maturity date before you can have access to your money. Sure, you can withdraw your money anytime but the interests you may have earned from it may lose out due to the penalties and charges. The purpose of this investment is to give slightly higher returns and at the same time keeping your money safe.
A savings account is the primer of all investments. If you don’t know anything about investments but you want to start as soon as possible, opening a savings account is the easiest route. Besides, all investors in the world who know anything about investments have at least one savings account.
The concept of this investment is that it protects your money first and foremost. This gives you a very small interest rate, however, your money in a savings account will be very liquid (i.e., easily accessible anytime). The purpose of this investment is to safe keep your money until you need it.
Money Market Accounts (also called Money Market Funds)
A money market account is a conservative type of fund that is managed by fund managers of a bank or an investment institution. A money market may or may not yield higher interest rates than a Time Deposit. Its performance depends on how good a fund manager is in managing the funds. There will be instances where a money market will outperform a time deposit and there will be times where the time deposit may perform better than a money market. Usually though, they are just at par with each other.
Different banks and investment companies may have different rules in their money market funds. Some companies may give specific maturity dates while others may give their depositors the freedom to withdraw their money anytime. The purpose of this investment is to give the depositor a chance to earn a slightly higher interest rate while at the same time keeping the funds safe. The one advantage a money market has over a time deposit is that if the account has no maturity date, then you can withdraw your money anytime without penalties and charges.
Special Deposit Accounts or Special Savings Accounts
Different banks may have different product names for it. You will know that it is a special savings account because they issue a passbook for this account. A special savings account usually yields higher interest rates than a time deposit. They usually require a high minimum maintaining balance. The minimum maintaining balance for this account is usually very much higher compared to a time deposit.
The purpose of this account is to give a higher interest rate for your savings and at the same time, will give a very safe environment for investment. The concept of this investment is usually the same as that of time deposits. It has a short term maturity date and you should not withdraw money before its maturity date or there will be charges and penalties.
Long Term Deposits
A long term deposit gives the depositor a chance to earn a significantly higher interest rate. However, it requires the investment to be held in long term. Long term deposits may give 3-year, 5-year, 7-year, or 10-year maturity dates. Most, if not all, long term deposits gives out the interest to their investors regularly. The range of giving out the interest to their investors may be monthly, quarterly, semi-annually, or annually. In some instances, the interests are held to maturity.
Different banks and investment institutions may give different schemes for their investors. They may have different rules and different terms for their investors. As a responsible investor, it is your duty to ask and know what you are getting yourself into. It is very important that you know the terms and how often they will release the interests that you have earned.
Fixed Rate Government Bonds
Government bonds are considered by many depositors and investors to be one of the safest investment instruments out there. Why? Because it is highly unlikely that your local government will default on its debts and obligations.
It is not always easy to get a hold of government bonds in fixed interest rate. So if you plan to invest your money in government bonds, you would need to be alert about your local business news on when new government bonds will be issued. You’d also want to know which banks and investment companies will provide them for small scale investors. The safest government bonds are those that have fixed interest rates but they are usually issued in long term.
An alternative to getting a fixed rate government bond is through a secondary market. However, acquiring them through secondary markets have other charges that the investor would need to pay plus bonds in secondary markets have fluctuating prices.
The concept of this type of investment is that when your local government needs funds for new projects, they will issue bonds to ensure local investors that they acknowledge they have a debt to pay investors. In effect, you are lending money to your local government and the bonds issued are to certify that they acknowledge that they are in debt and have an obligation to pay.
The open ended investment scheme (i.e., fluctuating interest rates) of government bonds are easier to find. The open ended government bonds may not be as safe because there will always be a chance to lose the principal of your money. So if you are vying for the safest government bonds, seek to invest in government bonds that give fixed interest rates. Fixed rate government bonds offer lower yields but they are the safest. Another disadvantage of this is that they are rarely available unless you plan to acquire them through a secondary market.
All these investment methods are safe provided that you look for a trusted bank or a trusted investment company. As an investor and as an owner of your own investments, you are responsible for finding an institution that you can trust.