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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 November 18, 2020

    15 Tips to Restart the Exercise Habit (and How to Keep It)

    15 Tips to Restart the Exercise Habit (and How to Keep It)

    It’s okay, you can finally admit it. It’s been two months since you’ve seen the inside of the gym. Getting sick, family crisis, overtime at work and school papers that needed to get finished all kept you for exercising. Now, the question is: how do you start again?
    Once you have an exercise habit, it becomes automatic. You just go to the gym, there is no force involved. But after a month, two months or possibly a year off, it can be hard to get started again. Here are some tips to climb back on that treadmill after you’ve fallen off.

    1. Don’t Break the Habit – The easiest way to keep things going is simply not to stop. Avoid long breaks in exercising or rebuilding the habit will take some effort. This may be advice a little too late for some people. But if you have an exercise habit going, don’t drop it at the first sign of trouble.
    2. Reward Showing Up – Woody Allen once said that, “Half of life is showing up.” I’d argue that 90% of making a habit is just making the effort to get there. You can worry about your weight, amount of laps you run or the amount you can bench press later.
    3. Commit for Thirty Days – Make a commitment to go every day (even just for 20 minutes) for one month. This will solidify the exercise habit. By making a commitment you also take pressure off yourself in the first weeks back of deciding whether to go.
    4. Make it Fun – If you don’t enjoy yourself at the gym, it is going to be hard to keep it a habit. There are thousands of ways you can move your body and exercise, so don’t give up if you’ve decided lifting weights or doing crunches isn’t for you. Many large fitness centers will offer a range of programs that can suit your tastes.
    5. Schedule During Quiet Hours – Don’t put exercise time in a place where it will easily be pushed aside by something more important. Right after work or first thing in the morning are often good places to put it. Lunch-hour workouts might be too easy to skip if work demands start mounting.
    6. Get a Buddy – Grab a friend to join you. Having a social aspect to exercising can boost your commitment to the exercise habit.
    7. X Your Calendar – One person I know has the habit of drawing a red “X” through any day on the calendar he goes to the gym. The benefit of this is it quickly shows how long it has been since you’ve gone to the gym. Keeping a steady amount of X’s on your calendar is an easy way to motivate yourself.
    8. Enjoyment Before Effort – After you finish any work out, ask yourself what parts you enjoyed and what parts you did not. As a rule, the enjoyable aspects of your workout will get done and the rest will be avoided. By focusing on how you can make workouts more enjoyable, you can make sure you want to keep going to the gym.
    9. Create a Ritual – Your workout routine should become so ingrained that it becomes a ritual. This means that the time of day, place or cue automatically starts you towards grabbing your bag and heading out. If your workout times are completely random, it will be harder to benefit from the momentum of a ritual.
    10. Stress Relief – What do you do when your stressed? Chances are it isn’t running. But exercise can be a great way to relieve stress, releasing endorphin which will improve your mood. The next time you feel stressed or tired, try doing an exercise you enjoy. When stress relief is linked to exercise, it is easy to regain the habit even after a leave of absence.
    11. Measure Fitness – Weight isn’t always the best number to track. Increase in muscle can offset decreases in fat so the scale doesn’t change even if your body is. But fitness improvements are a great way to stay motivated. Recording simple numbers such as the number of push-ups, sit-ups or speed you can run can help you see that the exercise is making you stronger and faster.
    12. Habits First, Equipment Later – Fancy equipment doesn’t create a habit for exercise. Despite this, some people still believe that buying a thousand dollar machine will make up for their inactivity. It won’t. Start building the exercise habit first, only afterwards should you worry about having a personal gym.
    13. Isolate Your Weakness – If falling off the exercise wagon is a common occurrence for you, find out why. Do you not enjoy exercising? Is it a lack of time? Is it feeling self-conscious at the gym? Is it a lack of fitness know-how? As soon as you can isolate your weakness, you can make steps to improve the situation.
    14. Start Small – Trying to run fifteen miles your first workout isn’t a good way to build a habit. Work below your capacity for the first few weeks to build the habit. Otherwise you might scare yourself off after a brutal workout.
    15. Go for Yourself, Not to Impress – Going to the gym with the only goal of looking great is like starting a business with only the goal to make money. The effort can’t justify the results. But if you go to the gym to push yourself, gain energy and have a good time, then you can keep going even when results are slow.

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