This is a the first guest post I’m featuring. Thanks for the great info Ms. Burke!
The primary concept of investment is to use your existing money to earn more. It is one of the proven ways to secure your financial future. The money you earn from your investments can help you achieve your financial goals.
How Such Investments Can Help Your Finances
Here are a few advantages of investing in debt.
Earning Interest On The Invested Amount
Whatever be your financial goal, an extra amount is always helpful. When you invest in debts such as bonds, the company pays an interest since they’re using your money for their benefit. Usually, the bonds make fixed interest payments two times per year. Therefore, you can use this as a steady source of income to achieve your financial goals. However, before you bank on this option, make sure you know when you’ll be getting the interest so that you can plan accordingly.
A Greater Amount Of Security
Bonds are considered to be relatively safer investments than stocks. First of all, in case the company files bankruptcy, you, a bondholder, will have a higher claim on its assets. When that company will have to liquidate assets to satisfy the debts, the sale proceeds will first be distributed to the bondholders before the stockholders. So, there’s an assurance that you won’t lose your entire amount. Therefore, there’s a relatively lower chance of you falling into debt because of the huge loss in the investment.
Selling The Bond On The Secondary Market
There is a higher chance of potential gain when a bondholder sells a bond before its maturity. By doing so, you, the bondholder, can make a gain on the sale. If there’s such an instance when a bond may lose its value upon maturity, you can sell it at a higher price than its face value in the secondary market and earn a profit.
Saving Tax On The Interest Income
If you invest in Series I savings bonds or bonds issued by the US Department of the Treasury, you don’t have to pay tax on the interest income to your state and local government. But, you’ll have to pay tax to the federal government. So, you save a substantial amount that you can use for achieving your financial goals.
How To Choose Where To Invest
If it is a common worry whether or not to choose stocks, bonds, or mutual funds to invest for a better return in the future. I would advise that you calculate your risk tolerance before making your decision. That means you need to invest your extra amount, into these funds, so that it doesn’t affect your present lifestyle.
The factors which you need to assess to assess your risk tolerance are your age, that is, whether or not you’re nearing retirement, along with your concerns like health care, child’s education, and so on.
Depending on the above factors, you can build your investment portfolio. It is advisable to mix your portfolio with risky and relatively lower-risk investments.
What Financial Goals You Can Achieve With Your Invested Amount
While talking about achieving financial goals, it is better if you have a clear concept of which goals you want to achieve. Here are a few of them.
Paying Back Debts
You can use the money, you get from bonds, to repay your debts. Even if not the full outstanding balance, you can repay a considerable amount of your outstanding balance. If you are trying to consolidate payday loans, you can use the money to make the monthly payments. And, if you have to settle payday loans or credit cards, you can use the money to make lump sum payments and get rid of your debts.
Building A Fund For The Rainy Days
Just think for a while, you could have avoided taking out payday loans or swiping your credit cards if you would have an emergency fund with a good amount. Even if you have an emergency fund, try to have at least six months’ worth of your lifestyle expenses. And, use this fund only for emergency purposes. Also try to replenish it as soon as possible.
Saving A Substantial Amount For The Future
The financial experts are of the view that everyone should start saving for retirement right from the day he/she gets his/her first paycheck. So, if you’ve not been able to deposit money towards your retirement account, your investment can help you make a jump start. Use the amount you’re getting from mutual funds to start your retirement account and secure your golden days.
It is advisable that you plan a budget so that you can save a substantial amount which you can use to invest in debts for a profitable return in the future. Moreover, monitor your bonds from time to time so that so that you know how they are performing and if required, you can sell it to make a profit if required. And, when you get the amount, use it wisely to improve your financial situation and for a better financial future.