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Posts Tagged ‘bonds’

How Stock/Bond Investments Make Money

October 28th, 2011 No comments

In a previous post, I discussed why cash is not a good investment (due to inflation and and its inconsistency in its ability to generate reliable income). If you use your cash instead to invest in stocks or bonds what is it that you are getting and how does it make money?

First, Your Principal is at Risk

Holding cash in insured savings, checking accounts or in money market funds will give you virtual certainty of keeping your principal safe. So, even if interest rates go up or down at the very least you will still have your principal. When you make the transition to other investments, your principal is no longer safe. You can lose money or make money due to the change in value of the asset.

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You Don’t Need to Invest In Stocks

February 20th, 2010 No comments

One of the first posts on the site was this one, which talked about the definition of an investment. There are many different things you can invest in, in addition to stocks. The criteria you should use to determine your investments should be based upon how well they fit your financial plan goals, or in some cases no goals (I sometimes invest in things that may be speculative or just for fun). You may not need or want to invest in stocks. Here are some considerations as well as a case study that demonstrates one option to a typical stock portfolio.
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