You may have asked yourself at one time or another, “Should we invest in the stock market”. Stock market investing can be complicated for beginners luckily in this article I am going to give you a great investment alternative to the stock market.
Should we invest in the stock market – NO! If you don’t know what you’re doing, a far better alternative is money market accounts.
What are money market accounts? These are fixed income securities, similar to bonds except that they mature in a far shorter space of time (usually less than a year). These securities are issued by governments and large financial institutions, they are very safe and conservative and because of this offer a far lower rate of return compared to other investments.
The easiest way to invest in the money market is through a money market bank account. These accounts pool together the money from 1000’s of investors to buy money market securities. These are securities such as.
· Treasury bills – these are short term securities that mature in less than one year. They are considered risk free and because of this have very low rates of return.
· Certificate of deposit – this is an instrument where you deposit your money for a certain period of time (three months to 5 years) at a certain rate of interest with a bank. They have a slightly higher interest rate because there is a chance that the bank will default although this is highly unlikely.
· Commercial paper – this is a short term loan issued by a corporation. They are very short term and mature in 2-9 months; these investments are very safe because it is easy to predict where the company will head in the next few months.
· Banker’s acceptance – this is a short term investment that is issued by a non financial entity but guaranteed by a bank.
· Euro dollars – this has nothing to do with Europe or Euros. Simply put Eurodollars are deposits in overseas banks. Deposits are usually very large (in the millions) and are out of the reach to most investors.
· Repos – this is short for repurchase agreement. Repos are part of securities like treasury bills; they involve selling a security such as a treasury bill and then buying it back at a later date for a predetermined price. They are very short term (from a few days to a month at the most)
Should we invest in the stock market? This is a hard question to answer but luckily in this article I have given you a few good alternatives. If you would like to learn about a cant fail stock market system please visit my blog by following the links below.