Investing – Stocks, CDs, Mutual Funds, Bonds, Commodities

Where to invest your money in 2012?  One of the most important questions that everyone wishes they had the answer too is where to invest their money. You have a lot of options that you will want to consider.  You can purchase, stocks, bonds, commodities like precious metals and even real estate.  The uncertainty in the weak economy has financial analysts guessing on what may be their best options for 2011.  We believe that diversification maybe your best option and that is why we will breakdown each sector separately. And before investing in any businesses, remember to verify if they got their DUNS Number at DandB. You can use that useful information to check business credit ratings and financial history

Investing in Real Estate

The real estate market has been destroyed in the last few years. Foreclosures and short sales have been rising at an alarming rate.  The real estate market has been so bad that the government had to step in with a bank bailout.  The government purchased some of the banks bad assets to try to stimulate the lending process.  Banks have been deeply battered by what professionals call bad paper.  Upside down mortgage and a high percentage of foreclosures has made banks change the way they do business.

They have been forced to change the way they handle foreclosures and have started approving many short sales in the industry.  So why should you consider buying real estate?  In most cases when a sector is failing it opens up opportunities for large gains on investments.  Even though the real estate market is still no recovering as fast as it should now maybe the time to jump in.

In most cases you can purchase a house for almost half of what it costs to rebuild. We believe that the housing market will take time to recover but real estate is a good long term investment.

Investing in Commodities

Commodities have become great investments in the past few years.  Investments in precious metals like gold and silver have brought investors some dramatic return son their money.  Oil has also been a safe investment. It is presumed that shortages of oil are believed to make the prices of a barrel continue to rise in the near future.

As the American economy gets stronger the need and consumption of oil will continue to rise.  Other commodities have also intrigued the interest of many investors and speculators.

Investing in Stocks

The stock market has been slowly recovering from the recession and is starting to gain ground.  Many investors believe that some stocks are overpriced and should not be purchased in the near future.

Stocks and mutual funds have always been the backbone of the American economy and in most cases as the stock market goes so does everything else.  We believe that investing in mutual fund or ETF’s make sound investments in 2011.  Tech stocks are getting a lot of attention as well as some retail chains.

No matter where you invest your money in 2011 you will have to take some risk.  The rule of thumb is only to invest money that you do not need live on.  Always diversify your investments to make sure that you do not get hurt.  The best way to invest is for long term gains.  Speculating can be a dangerous venture and not something that we recommend.

Investing In Certificates of Deposit

Certificates of Deposits, more commonly referred to as CDs, are what is known as a time deposit. They are provided by banks and credit unions and function much like a savings account because they are FDIC insured and practically free of risks. CDs differ from savings accounts because they generally offer a higher interest rate. In exchange, the account holder agrees to keep the money deposited with the bank for a specified period of time, usually three months, six months, or one to five years. The Certificates of Deposits are said to be held to maturity when that time elapses, after which the money can be withdrawn with whatever interest has accrued.

Usually CDs require a minimum deposit. Higher interest rates are sometimes provided for bigger deposits although many financial institutions offer lower rates for CDs that are larger than $100,000, which is considered a Jumbo CD. Account holders who withdraw their deposit before maturity can suffer stiff penalties in the form of months of interest losses. Penalties discourage account holders from making early withdrawals. When a Certificate of Deposit is set to mature, some financial institutions will offer the account holder the option of rolling over the principal and accrued interest in to another CD. Although some financial institutions automatically roll the CDs over, specifying only a grace period before doing so.

The interest on a Certificate of Deposit can be paid out in a couple of different forms. Some banks and financial institutions offer the account holder the opportunity to have the interest mailed at regular intervals as a check, or transferred in to a checking account or regular savings account. Because the money will not be compounded, this decreases the total revenue. Account holders can also opt to have the interest collected at the time the CD matures.

Deposit brokers also offer CDs. The benefit of using a brokerage firm is they can often negotiate a higher interest rate for the account holder. They can accomplish this by guaranteeing to draw a minimum number of deposits to the bank or financial institution. These brokered Certificates of Deposit are sometimes owned by a group of investors rather than an individual. Each unrelated investor owns a portion of the Certificate, which means each can qualify for up to $100,000 of FDIC coverage. Generally the standard coverage for single account holders is up to $250,000 per depositor.

While CDs are a safe way to increase earnings from deposits, they generally don’t make much more in interest than an average savings account, but they are easy to set up and manage which makes it a boon to the average account holder who knows little of investment strategies.

Investing In ETFs And Mutual Funds

Much has been said and much has been written about the current investing climate in the financial markets. If anything has been learned in the past two years by individual investors it is the need for portfolio diversification. Long gone are the days of riding a high flyer for a triple digit gain over a few weeks or months.

Investors are looking for lower risk investments while still wanting significant gains. That is understandable although not always possible. Risk and reward, reward and risk will always work in tandem when investing in financial markets.

Exchange traded funds or more commonly known as ETFs have gained in popularity recently. ETFs offer the diversification of mutual funds with the liquidity of stocks. While mutual funds offer significantly more choices when deciding on which index fund you may invest in, ETFs track the indexes of stocks, bonds, real estate, commodities, and specific industries. For beginners investing in ETFs these instruments offer some stability.

ETF generally have a lower expense ratio comparable index mutual funds. Trading ETF funds offers flexibility that you cannot find mutual funds. ETF funds are created for many innovative indexes also not found with mutual funds.

When comparing mutual funds to ETFs consider the transaction cost of the ETF. Many mutual funds are no-load and have no transaction fees, while ETFs and transaction fees for the buy and for the sell much like stocks.

ETFs like mutual funds are not for everybody. However, both offer alternatives to the higher risk markets of trading individual stocks. Be sure to check the track records in return history’s ETFs just like you would the best mutual funds.

Investing In Municipal Bonds

Municipal bonds are issued to investors directly to meet instant the instant cash requirements of the issuer. Issuers are typically municipalities, cities, and states and the issuer receives a cash payment at the time of issuance in exchange for a promise to repay to the investor providing the cash.

These repayments can be in as little as a few months, but more likely will extend to terms in length exceeding twenty or thirty years, sometimes even longer. The proceeds from municipal bonds are typically associated with capital projects or for other projects where the issuer does not want to pay for the project with funds on hand. The tax regulations associated with the governance of municipal bonds requires all money raised via a bond issuance be spent on one-time capital projects within typically a three to five year period.

There are, however, certain exceptions that permit the issuance of bonds for ongoing operations, maintenance, funding student loans, and other sundry operations and projects. Municipal bonds are attractive to investors because of the special tax-exempt status they offer to investors. For that reason, the investor will typically accept a lower interest payment than that afforded by other types of borrowing making the issuance of bonds and attractive alternative funding source for growing municipal entities.

Municipal bonds are just one of many ways municipalities can issue debt. Other options such as certificates of participation and lease buyback options exist and are used as well to raise capital; however the laws governing these differ from those governing municipal bonds. The four primary types of bonds are General Obligation Bonds; Revenue Bonds; Commercial Papers; and Private Activity Bonds with bonds investing.

All provide the issuer with access to quick cash to develop projects and expand and attract new economic activity to the local communities served by the municipality. The probability of repayment as promised by the bond issuer can often be determined by an independent rating agency such as Standard & Poor’s, Moody’s and Fitch. Typically, these agencies are hired by the issuer to assign a rating to the bond being issued. This provides valuable information to potential investors and help to sell the bonds within the primary market.