Money market funds

Opportunities to You

Money market funds are great investments for people who want to put some cash away without taking a great risk. While you can’t expect to get a ridiculously large return on your investment, you can expect to have a stable return on your efforts. There are some things to consider before infesting in money market funds.

Of course, you want to have a clear definition of what money market funds are. Who wants to invest in something that they really don’t understand. It is very important to get some background information about this kind of investment before making any decisions or opening an account of your own.

Money market funds are similar to mutual funds but without the risk. The lack of risk is often reflected in a lack of surprise as far as your return is concerned. While the stock market can be a virtual rollercoaster for some, money market funds are safer. There is, however, no absolute guarantee on your return.

It is very important that you make a clear distinction between money market funds and a money market account. The latter is simply a savings account established in a bank. Basically, the bank account is a special kind of savings plan that offers a higher percentage than your average package.

So, the money market accounts are not considered traditional savings accounts and they are not exactly like taking great risks on the stock market, either. I guess you can equate the money market funds to playing a game of poker knowing that you will leave with at least a few extra dollars.

There are some clear-cut reasons that money market funds are so valuable to many of us. First of all, they are ideal for those of us who like stability and safety. These investments are pretty stable and many offer a fixed return on your money. This stability is one of the most appealing aspects of these kinds of accounts, especially for anyone that is really relying on his savings. 

Second, you don’t need to be rich to start up one of these accounts. You can start money market funds with a relatively small initial investment. This was the most appealing aspect for me when I started my account. I was waiting tables and I had a pretty modest income. The money market funds provided a way for me to start saving well without going broke in the process. 

Opportunities to You

Grow your money

Opportunities To You

Assuming you have a good spending and saving habits, which will now have a fairly large sum of money that is useful to do what you please. So what will you do with all that money? Happens all luxury items you have your eye on for over a year? Going on vacation? Or do the smart thing and save?

It's important have a goal to start a savings program because the goal of encouraging saving - not like a carrot dangling in front of the donkey, even if you are far from being an ass if it's smart to be the motivation to save.

So if you do not have goals, think. You do not have to limit yourself to a single goal - to have some goals if they help you save more, provided they are realistic and worthwhile.

In the meantime, while you keep your anger toward the goal or goals, where you keep your savings? Kept in the drawer? That's not a smart thing to do, because it's not such a terrible thing called inflation, which is figuratively interrupt pending idle savings. They see the money just lying there in the drawer and bang! what puts money in the jaw!

Inflation and purchasing power

What is inflation? No, not insects or animals. It is abstract. Inflation is the economic term for the rising prices, or the cost of living. Inflation is when the price of things you buy on the rise. Let me give you an example. Say your family to take grandma to dinner at his favorite restaurant Nyonya. This is the first visit to Kuala Lumpur Your grandmother or city for that matter - who lives in a small town and never venture outside their garden gate.

Of course, you have to ask your favorite dessert - ice kacang! There is no denying that a lot of rainbow colors crushed ice with syrup and milk, sitting on a variety of beans, corn, beet jelly, longan and what-again, and topped with ice cream. When his father to pay RM4.50 fish out his nut ice - care of Grandma! He could leave his chair in shock! Why? Because when he was a child, peanut ice only costs 10 cents. DIME! Now it's your turn to fall off the chair!

That's what we mean by inflation. Price increases. Sixty years ago, the ice grains costs 10 cents. Today at a restaurant costs RM4.50 and RM1.50 own posts. The price has shot skyward. Put another way, inflation has reduced the purchasing power of money over time. 10 cents grandmother can not buy a plate of beans ice today, maybe just a little crushed ice. 10 cent has lost a lot of buying power, buying less than they did 60 years ago. In fact, the price of peanut ice hawker days will not last forever RM1.50. It will go up and you do not have to wait until a grandmother / grandfather to see this. When you are a father / mother, want to bet bean ice probably cost about RM2 in the stalls.

That's inflation for you. And the bad news is that inflation is not only attacking the food. Is rampant, sink the nails in all things and services that are part of life - clothing, furniture, bicycles, home, movie tickets, taxi rides and other park. That's why it is called the cost of living.

So what does this mean for your savings? Only if you just hide their savings - let's assume that you have saved RM100 - in drawers, you just stay RM100 RM100 to want to use it. Meanwhile, inflation nibbling RM100 value so that when you actually use later, RM100 you wont be able to buy everything when you start to save. This is because - depending on how long you keep your money - the price will increase at the same time. Of course, if you immediately use their savings, inflation probably will not have the opportunity to work again. But of course, we're talking about a savings program here, and that means a long enough period of time for your savings to grow - and inflation occurs,

So what should you do? To fight inflation, should make their savings grow in value faster than the rate of inflation. (We are sure you have more) If you just let your savings RM100 remain the same, you know that over time the purchasing power of RM100 not RM100 but less - because the price will increase. However, if you can grow RM100 savings, for example, RM150, so that in the future you can not just buy the same things that the RM100 can at the beginning of your savings, you can buy more things.

The investment is the way forward

To grow your money, you will not leave your cash in the drawer or property under the mattress or in any other place that is just put on and forget about it until you want to use. To grow your money, you should do the smart thing the second - the first smart move is to save - you should invest.

Investment is defined as the use of money (in this case, their savings) to make more money. Adults, people who are smart, they do. They invest to make money with their money, and when it has grown, it becomes to invest large amounts and in the process of investing time and again, your money is doubled, tripled or multiplied many times. This is how people become rich not by winning the lottery (which has one chance in seven million or so), but through savings and investment. You can do the same with a small amount of your savings and watch it grow.

There are many ways to invest your money for profit. The return is the amount of income you earn from your investment. The simplest and most common is to put your savings in a savings account or fixed deposits (and we're sure you all know this). Your savings will grow as the bank pays a sum of money (the return) is called interest, provided that the money is in the bank. So your savings grow to use and when you remove it from your bank account, the amount of money you have now is the original deposit and the interest that has accumulated. It's not just your RM100 but a larger sum.

So the bank account is a type of investment that easy. Others invest in the stock market by buying shares in the company. Many adults do this. People usually invest in stocks, hoping to get a return in two ways. One is the dividend, the financial benefits that companies pay to shareholders only when the company makes. The second is the realization of a profit by selling their shares. Profit is profit in money between what you paid for the shares and what you get when you sell your shares. Simple math to explain profitability. For example, if you have a deposit of RM600 and RM3 to buy 200 shares each, and three months later, to sell their shares to 200 RM4, you will make a profit of RM200.

Here's how:

Cost to buy 200 shares at RM3 per share = 200 x RM3 = RM600.

The amount of money received from the sale of 200 shares into shares RM4 RM4 = 200 x = RM800.

= Profit = Sales less purchases RM800 - RM600 RM200 =.

Gains have been made to swell their savings RM800 to RM600.

There are other ways to invest your money.

You can also buy a house, if you have lots and lots of money (for example, to inherit the wealth of her favorite aunt who had died). If you rent your home, your return will be the amount of rental income received from tenants. The investment of the method you choose will depend on factors such as the amount of storage you have and how much you want to re-do. Investment each has pros and cons.

For example, investing in stocks can get more return on your bank account, but it is more risky. If you put your savings in a bank account, your money is protected. Do not miss it because you can lose your money in stocks if you buy the wrong side. Even if the bank is robbed, or burned or declares bankruptcy, the law states that you will get your money back. Not so with stock investments. However, bank interest income is relatively small.

Investing in real estate as a home can be a great return, but it is a long term investment. It will be years before many home prices rose for you to sell your house and make a profit. (Remember? Sale Profit less equivalent.) Get his return from investing in stocks much, much faster, but as we said before, you should be smart (and lucky) to choose the right to buy or you may lose your money invested.

Even with all types of investments (except maybe for a bank account), there is always the possibility of losing their life savings, some of the returns. If you invest unwisely, may lose both your original deposit amount and not a return to everything.

However, there is no mistake about this: the investment is the way to build your wealth. Just invest wisely!

Opportunities To You

When Should You Borrow Money

Opportunities To You

Quick: what's the easiest thing to do today (financially speaking)?

If you answered 'borrowing money', then go to the front of the class because you are obviously a sharp student and a citizen of the world.

Unlike those days when borrowing money was tough, today, everyone wants to lend you money. Banks, finance companies, credit cards, cooperatives, pawn shops - they all want to lend you money. So they send in pamphlets, flyers, letters, e-mails and even pre-approved loans with attached cheques to you. All you need to do is say 'yes', sign the form and the money will be in your bank account in the blink of an eye.

So much so that I think the only qualification that one needs to borrow money today is to have a heart beat! Even people with bad credit report or are in the 'black-list' can still borrow money. Just log on to the websites of some cooperatives, and you will see that they proudly display that 'people in the blacklist can apply.' In short, if you are alive, then you can borrow!

So again, there are no shortages when it comes to people offering you money.

But should you take up the offer because it's right in front of you? Should you grab it because it is there? After all, it is fast, easy and convenient. And most of all, it is m-o-n-e-y.

Now while there are a lot of fun things you can do with the money, being someone who wants to create a better financial life (why else would you be reading this magazine?), the answer may be no. Firstly, you are not going to borrow the money just so that you can blow it on some gadgets, trinkets or toys. (Those who plan to do so should be reading Stuff magazine instead!)

You are going to borrow only when you can generate more money with it. In other words, you borrow only when the return from the investment you are going to make is higher than the interest charged for the loan. For example, the return is 10 percent and the interest is 6 percent.

Obviously, you would not do so when the situation is the other way around, i.e. when the return from the investment is lower than the interest charged for the loan. If you say that you cannot find an investment that gives a higher return than the interest charged, then the answer is not to borrow! Wait until you can find one that gives a higher return. I can assure you that there are plenty of good investments if you look hard enough.

But of course, life is not that straight-forward. While the math says that you should borrow when the return on investment is 7.5 percent and the interest is 6.25 percent, what is missing from the equation is the risk involved. Now if both the return and interest are fixed, then it is not an issue, go ahead and borrow. However, often times, both are not fixed, which means they can go up or down. And this being life, it is the return that always drops and the interest that always rises!

This is why you should only borrow when the return exceeds the interest by at least 5 percent. For example, if the interest is 6 percent, the return must be 11 percent or higher. This way, you are building in a safety margin to cater the fluctuations of the rates.

You will no doubt realize that it is not so easy for the above situation to happen. It is rare for the return from an investment to exceed the loan interest by 5 percent. In fact, it is rare for most investments to give a consistent double figure return.

This is why you should borrow money only on two occasions; (1) to buy properties, and (2) to expand your business. Of course, provided that you have done your homework and know what you are doing. Buying the first property you see is a sure recipe for disaster.

This brings us to the most important point of them all; when you borrow money, don't forget that you have to pay it back, plus interest! And let me further remind you that the people who lent you money do not have a sense of humour - they always want their money back! And some of them will take some extreme steps to get their money back.

So to summarize, do your homework before borrowing money. If you cannot make more money with the borrowed money (while taking a reasonable risk), then do not borrow. Let the people who did not read this article take all the risks instead!

Azizi Ali is Malaysia's premier writer, speaker and coach on money matters. He is a Chartered Financial Consultant (ChFC) and holds an MBA from University of Bath, UK.

Log on to http://www.beahappymillionaire.com to find out more about Azizi and how he can help you lead happier prosperous lives.

Article Source: http://EzineArticles.com/?expert=Azizi_Ali

Opportunities To You