Investment Options: Certificates of Deposit & Bonds

Essay by pd7298College, UndergraduateA, April 2007

download word file, 7 pages 3.0

AC320 Report

"Investment Options: Certificates of Deposit & Bonds"

Gathering information about the many investment options available is critical in order for a person to make the most of their money. There are many different options available, each with unique characteristics, so knowledge is the key to a person's financial success. No single investment plan works universally for everyone because each person's specific needs and capabilities are different. Although there are many investment options available, the two that we are going to look closely at today are Certificates of Deposit and Bonds. Examining both options, and understanding the advantages and disadvantages of each, will enable a person to make a wise investment decision.

When beginning to think about what investment options are available in order to maximize one's earnings, there are several factors a person should consider before making any final decisions. How much risk is involved? What is the rate of return? How long will the money be tied up for? Are there any tax effects to take into consideration? Are there any special features of the investment that should be looked at more closely? First of all, knowing what kind of risk is involved is very important.

Risk tends to be directly related to the rate of return, therefore the more risky the investment the better the rate of return will be. Less risky investments such as simple savings accounts are going to provide a small rate of return, because of the fact that the money is very secure and easily attainable. Another important factor to examine when considering investment options is the actual rate of return. Interest rates can vary greatly between different investing options so knowing how much you will actually be earning on your money is important to know and understand. Also, a...