USE Credit Union
Investments & Insurance

What Do You Know About Investments?

The investment world can be as complex or simple as you would like to make it. There are many options available from which to choose when you have your investment plan ready to implement.  Let’s take a look at some of the different investment tools available in more detail so you will have a better understanding of each.

Stocks
A corporation has stockholders or shareholders that own a percentage of the company. The stock is purchased as an investment in the company with the understanding that the company will be profitable and the stock price will go up.  Additionally, companies may issue different classes of stock for different purposes, such as ownership, investment purposes, market prices, dividend policies, etc.  Usually, one share of stock represents one vote.  The value of stock is dependent upon the market conditions at the time of purchase and the time of sale. Most people hope to purchase stock at a lower rate than they sell it for at a later date. Timing is everything in the stock market.

Bonds
Bonds are loans made to corporations and governments. Borrowers get cash and investors earn interest, similar to loans you get for your home or car.  Bonds are considered to be less risky than stocks since companies pay off all their debts (including bonds) before handling obligations to stockholders. There are three primary types of bonds: Corporate Bonds, U.S. Treasury Bonds, and Municipal Bonds.  Bonds can be purchased by stockholders and some banks. Treasury bonds are sold at issue directly to investors without any representative or commission. Bonds are often sold in bundles that require a significant minimum investment.

Mutual Funds
Mutual funds are the collection of the investment products previously discussed into one package – stocks, bonds, other securities, etc.  Mutual funds provide you with a way to diversify without having to select individual securities.  Additionally, they offer the added advantage of significant purchasing power that comes from the size of the fund.
Mutual funds are created when a mutual fund company decides upon an investment concept.  The company then issues a prospectus and sells shares in the fund.  The success of the fund creates interest in other funds for the company; therefore, success breeds more success.  Money within a mutual fund moves in and out constantly in high amounts, which requires skilled, professional management.  These professionals manage mutual funds on a full-time basis and are there to serve you.  You can measure whether a fund has performed well in the past by using benchmark services or through your financial advisor.

Cash
When you decide to invest in cash (or a cash equivalent), we are referring to savings deposits, treasury bills, money market accounts, money market funds, certificates of deposit/share certificates, and even individual retirement accounts (IRAs).  While they are the safest investments a person can make, they also provide the lowest rate of return when compared with stocks and bonds.  In most instances, the Federal Government guarantees or insures these investments (e.g., FDIC, NCUSIF, etc.).

Learn more about the investment options available through our partnership with LPL Financial. 

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