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10 More Investments You Should Know

10 More Investments You Should Know

    On Tuesday, we discussed the first ten of the twenty investments everyone should have at least a passing familiarity with. We still have another ten to go, so let’s get started.

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    1. Mortgage-Backed Securities (MBS)

    While I wouldn’t recommend buying an MBS these days, it’s still an investment worth knowing. In order to be able to afford to offer mortgages, most small banks package their mortgages and sell them through Freddie Mac and Fannie Mae. As the housing industry works through the toxic mortgages it’s offered over the past couple of years, it’s best to avoid investing in an MBS or a collateralized mortgage obligation (CMO) — the cheaper version of an MBS.

    2. Municipal Bonds

    Municipal bonds, often called ‘munis,’ are bonds issued by states, counties, or municipalities for capital expenditures. When you purchase a municipal bond, you’re essentially offering a loan to the local government. At first glance, most municipal bonds seem to have very low returns; however, most are exempt from federal taxes and can be exempt from state and local taxes as well. When you factor in the improved tax situations, the return on municipal bonds is significantly better.

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    3. Mutual Funds

    Members of mutual funds lump their money together and have a mutual fund manager buy stocks. The mutual fund manager is responsible for researching stocks, making sure the fund is diversified and all the details that can make investing in stocks worrisome for first time investors. Most funds have a set goal, along with strategies for risk and return. Mutual funds are particularly popular because you can easily make monthly purchases.

    4. Options (Stocks)

    Options are not actually securities, unlike many investments. Instead, options are the privilege to buy or sell a particular security at a set price within a certain period of time. If, for instance, you were to buy an option to buy a stock, you would hope the share price will rise significantly; you then purchase the stock and immediately resell it — or you can resell the option. Stock options are a particularly risky investment and most brokers will require you to receive approval to trade options — the added step is an attempt to limit the number of traders with no experience or knowledge.

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    5. Preferred Stock

    Preferred stock represents your ownership in a company, just like common stock, but most preferred shares do not confer any voting rights, unlike common stock. For most preferred stock, dividends are also often different than common stocks: you would normally receive a fixed dividend indefinitely with preferred stock. Preferred stock is treated more like a combination of stocks and bond than straight stock. The main benefit of this approach is that, in the event of a company going bankrupt, its preferred stockholders will be repaid before common stockholders.

    6. Real Estate and Property

    For most people, purchasing a home is the largest single investment they will ever make in their lives. Of course, real estate investments can go far beyond houses: commercial properties, undeveloped land, condos and other opportunities are all included in this category. While real estate has developed something of a bad reputation lately, it can still be a very worthwhile investment. However, it is important to remember that real estate can be one of the more expensive investments to hold, between maintenance, property taxes and related expenses.

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    7. Real Estate Investment Trust (REIT)

    If you’re interested in investing in real estate, but feel like it’s too expensive, you can still invest in REITs. These investments are traded like stocks on most major stock exchanges — they are directly invested in properties or mortgages. Compared to traditional real estate investments, REITs are far more liquid, have better tax advantages and have high yields. REITs are usually less volatile than the rest of the stock market, although lately they’ve been riskier than usual.

    8. Treasury Securities

    Treasury securities actually include a number of different investments, including treasury bills (short-term investments), treasury notes (medium-term) and treasury bonds (long-term). All treasury securities are considered low risk; they are loans made to the national government which is assumed to be unlikely to default. Because of the risk factor, the return on treasury securities is fairly low.

    9. Unit Trust (UIT)

    UITs are fairly similar to mutual funds in that they hold a portfolio of investments. However, they differ dramatically in the portfolios they each hold: UITs may own common stock, but rely on income-producing securities like municipal bonds, government bonds and corporate bonds. UITs are not actively managed like other investment portfolios might be: because they hold income-producing securities, they allow these investments to mature and pay out. UITs are mostly low-risk investments, although those that hold stocks can be less certainty of a good return.

    10. Zero-Coupon Securities

    While most bonds pay a return (known as a ‘coupon’) beyond their face value, banks or brokers also offer zero-coupon securities. Essentially, zero-coupon securities are bonds that have had their coupons stripped off: the broker removes the coupons and trades the remaining bond as a zero-coupon security. The benefit of investing in these securities is that you will pay less than face value — significantly less if the bond won’t mature for quite a while. For instance, you might pay $800 today for a $1,000 security that will mature in five years, when you will receive the full face value. Zero-coupon securities have little risk, but they do have a few tax disadvantages.

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    Last Updated on August 20, 2019

    Becoming Self-Taught (The How-To Guide)

    Becoming Self-Taught (The How-To Guide)

    Most of the skills I use to make a living are skills I’ve learned on my own: Web design, desktop publishing, marketing, personal productivity skills, even teaching! And most of what I know about science, politics, computers, art, guitar-playing, world history, writing, and a dozen other topics, I’ve picked up outside of any formal education.

    This is not to toot my own horn at all; if you stop to think about it, much of what you know how to do you’ve picked up on your own. But we rarely think about the process of becoming self-taught. This is too bad, because often, we shy away from things we don’t know how to do without stopping to think about how we might learn it — in many cases, fairly easily.

    The way you approach the world around you dictates to a great degree whether you will find learning something new easy or hard. Learning comes easily to people who have developed:

    Curiosity

    Being curious means you look forward to learning new things and are troubled by gaps in your understanding of the world. New words and ideas are received as challenges and the work of understanding them is embraced.

    People who lack curiosity see learning new things as a chore — or worse, as beyond their capacities.

    Patience

    Depending on the complexity of a topic, learning something new can take a long time. And it’s bound to be frustrating as you grapple with new terminologies, new models, and apparently irrelevant information.

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    When you are learning something by yourself, there is nobody to control the flow of information, to make sure you move from basic knowledge to intermediate and finally advanced concepts.

    Patience with your topic, and more importantly with yourself is crucial — there’s no field of knowledge that someone in the world hasn’t managed to learn, starting from exactly where you are.

    A Feeling for Connectedness

    This is the hardest talent to cultivate, and is where most people flounder when approaching a new topic.

    A new body of knowledge is always easiest to learn if you can figure out the way it connects to what you already know. For years, I struggled with calculus in college until one day, my chemistry professor demonstrated how to do half-life calculations using integrals. From then on, calculus came much easier, because I had made a connection between a concept I understood well (the chemistry of half-lifes) and a field I had always struggled in (higher maths).

    The more you look for and pay attention to the connections between different fields, the more readily your mind will be able to latch onto new concepts.

    With a learning attitude in place, working your way into a new topic is simply a matter of research, practice, networking, and scheduling:

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    1. Research

    Of course, the most important step in learning something new is actually finding out stuff about it. I tend to go through three distinct phases when I’m teaching myself a new topic:

    Learning the Basics

    Start as all things start today: Google it! Somehow people managed to learn before Google ( I learned HTML when Altavista was the best we got!) but nowadays a well-formed search on Google will get you a wealth of information on any topic in seconds.

    Surfing Wikipedia articles is a great way to get a basic grounding in a new field, too — and usually the Wikipedia entry for your search term will be on the first page of your Google search.

    What I look for is basic information and then the work of experts — blogs by researchers in a field, forums about a topic, organizational websites, magazines. I subscribe to a bunch of RSS feeds to keep up with new material as it’s posted, I print out articles to read in-depth later, and I look for the names of top authors or top books in the field.

    Hitting the Books

    Once I have a good outline of a field of knowledge, I hit the library. I look up the key names and titles I came across online, and then scan the shelves around those titles for other books that look interesting.

    Then, I go to the children’s section of the library and look up the same call numbers — a good overview for teens is probably going to be clearer, more concise, and more geared towards learning than many adult books.

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    Long-Term Reference

    While I’m reading my stack of books from the library, I start keeping my eyes out for books I will want to give a permanent place on my shelves. I check online and brick-and-mortar bookstores, but also search thrift stores, used bookstores, library book sales, garage sales, wherever I happen to find myself in the presence of books.

    My goal is a collection of reference manuals and top books that I will come back to either to answer thorny questions or to refresh my knowledge as I put new skills into practice. And to do this cheaply and quickly.

    2. Practice

    Putting new knowledges into practice helps us develop better understandings now and remember more later. Although a lot of books offer exercises and self-tests, I prefer to jump right in and build something: a website, an essay, a desk, whatever.

    A great way to put any new body of knowledge into action is to start a blog on it — put it out there for the world to see and comment on.

    Just don’t lock your learning up in your head where nobody ever sees how much you know about something, and you never see how much you still don’t know.

    3. Network

    One of the most powerful sources of knowledge and understanding in my life have been the social networks I have become embedded in over the years — the websites I write on, the LISTSERV I belong to, the people I talk with and present alongside at conferences, my colleagues in the department where I studied and the department where I now teach, and so on.

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    These networks are crucial to extending my knowledge in areas I am already involved, and for referring me to contacts in areas where I have no prior experience. Joining an email list, emailing someone working in the field, asking colleagues for recommendations, all are useful ways of getting a foothold in a new field.

    Networking also allows you to test your newly-acquired knowledge against others’ understandings, giving you a chance to grow and further develop.

    4. Schedule

    For anything more complex than a simple overview, it pays to schedule time to commit to learning. Having the books on the shelf, the top websites bookmarked, and a string of contacts does no good if you don’t give yourself time to focus on reading, digesting, and implementing your knowledge.

    Give yourself a deadline, even if there is no externally imposed time limit, and work out a schedule to reach that deadline.

    Final Thoughts

    In a sense, even formal education is a form of self-guided learning — in the end, a teacher can only suggest and encourage a path to learning, at best cutting out some of the work of finding reliable sources to learn from.

    If you’re already working, or have a range of interests beside the purely academic, formal instruction may be too inconvenient or too expensive to undertake. That doesn’t mean you have to set aside the possibility of learning, though; history is full of self-taught successes.

    At its best, even a formal education is meant to prepare you for a life of self-guided learning; with the power of the Internet and the mass media at our disposal, there’s really no reason not to follow your muse wherever it may lead.

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    Featured photo credit: Priscilla Du Preez via unsplash.com

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