In my last post about the power of compound interest, I gave you an example about the difference between simple and compound interest. And that compound interest can give you higher return by reinvesting your earned interest to earn more interest. In this post, I would like to give you (more…)

“The most powerful force in the universe is compound interest”

-Albert Einstein

If you are serious about saving or investing your money, you should understand compound interest. But if you think you’re not yet ready to enter the investment world, and you think that you still have to wait 3 or 5 more years before you start saving money, then I guess you’re the one who really needs to understand the power of compound interest. (more…)

The basic guideline in investing is the country’s inflation rate. All your savings for the long term, time deposits and other investments must produce rates that are higher than inflation. Your earnings rate should be 2 to 4 percent above inflation rate. So, if the inflation rate is 6%, your earnings rate should be 8 to 10%. Otherwise, you will lose a great deal of money especially if you invest for the long term. (more…)

Money-market funds resemble savings accounts. For every dollar you put in, you get a dollar back, plus the interest your money earns from the investments the fund makes. Since these funds are usually price-stable, some investors prefer them to stock or bond funds. But the interest the funds pay is low when interest rates are low. In some cases, money-market funds let investors write checks against their accounts. There’s usually no charge for check-writing although there may be a per-check minimum.

Like bonds, open-end bond funds produce regular income. Unlike bonds, however, these funds have no maturity date and no guaranteed repayment of the amount invested. On the plus side though, the earnings can be reinvested in the fund to increase the principal. And buyers can invest a much smaller amount of money than they would need to buy a bond on their own and get a diversified portfolio to boot. For example, (more…)

Stock funds invest primarily in stocks. But stock fund portfolios vary, depending on the fund’s investment objectives. For example, some stock funds invest in well-established companies that pay regular dividends. Others invest in young, high-technology firms or companies that have been operating below expectation for several years.

Like individual investors, funds may buy blue-chip stocks for income and safety, growth stocks for future gains, value stocks for stability and growth, and cyclical stocks to take advantage of economic booms. For investors, the major difference in buying a fund rther than individual stocks is the diversity they can achieve for the same amount of money.