Saving and investing will always attract people who are interested in making money via financial operations. Savings are not spent income or postponed consumption that can be achieved through various ways. Some individuals still adhere to conservative savings methods such as piggy banks, participating in sou-sous; some create savings accounts or invest in a pension plan. Various commercial banks offer customers a savings account that is beneficial for having easy access to their money; however, the interest rate banks propose is usually low. If a client is interested in higher dividends, they can create a Time Savings Deposit Account with a fixed deposit.
For a larger amount of deposit and a more extended period of saving, banks offer higher interest. This way of investing is beneficial if there are no close plans on the sum of the deposit (Sahadeo, 2018). Savings for one’s pension is essential to sustain the quality of life. A retirement plan can be private and created at work according to the treatment.
Investment is an act of placing money aiming to receive profit or a higher income as a result. An individual can invest in stocks, mutual funds, ETFs, bonds, annuity, treasury bills, money market funds, certificates of deposit, and many other various financial products. In this essay, the most common ways of investing will be considered. Bonds are a financial product supplied by the government or a private company representing a debt or a fixed amount of borrowed money. The issuer is obligated to pay the holder an interest over some particular period. Bonds are commonly safe investments; however, the income from bonds depends on market conditions.
Stock is an equity investment that gives ownership in a company. Generally, common shareholders receive dividends as a percentage of the firm’s income; still, stockholders take the risk on their shoulders as they can lose their investments if the business goes bankrupt. A mutual fund is another financial product that gathers investments from the participants and puts them in stocks, assets, bonds, and other assets that are generally called a portfolio. One stock of a mutual fund is valued by the total sum of investments divided by a number of shares. Treasury bills are set by the U.S. Treasury Department and represent a short-term debt available for both individuals and companies, and the return on issues varies on different repayment periods.
Nowadays, various professionals are working in the financial sphere and are willing to help customers achieve their final goals. Stockbrokers, financial advisors, and bankers might seem to a usual customer to be one person. However, these are separate professions that are providing help in different financial areas with various responsibilities. Stockbrokers are licensed professional financial workers that help clients settle the trade. Stockbrokers do not provide clients with investment advice; their main goal is to benefit from a trade for the client. As a result, stockbrokers usually earn a commission for each transaction that may be formed as a fixed rate or depend on the final profit of the client.
Financial advisors are proposing financial consultancy to a client in any sphere of finance. They manage the capital of the client, which is also called the “beneficiary”. The obligation of this profession is to always put a profit of the client in the first place, which stockbrokers do not have. As a salary, financial advisors take the dividend of assets under management (AUM). Investment bankers work in investment or commercial banks and are attached to corporate clients that need advice in transactions or guidance in financial details.
In the modern world, technologies give individuals more opportunities to have personal control over their investments and decreased purchases on the work of professionals in finance. For instance, online brokers allow clients to purchase and sell assets on their own using a platform on the Internet. The beneficial fact about these platforms is that some of them are free, and some acquire modest interest for their usage. Still, using the platforms is cheaper than hiring a stockbroker. Robo-advisors are currently replacing financial advisors as they are robots that make clients’ investment portfolios using algorithms and computer science. People who are more likely to trust technologies and calculations prefer Robo-advisors to financial advisors.
Before creating personal savings and investing plan, it is essential to calculate the start-up capital and the primary goals I have. I have achieved to save $1500 from monthly salaries at work. The amount of equity I am willing to invest is $1000 as it is the sum I can invest in an expanded period. It is significant as the beneficial outcome can be attained only in long-time investments. Among all the financial products, investing in stocks seems the most profitable action even though it requires some risk percentage.
To avoid risks, I chose to invest in shares of Walt Disney Company as it exists on the market since 1923 and shows high sustainability. Disney has diverse revenue sources such as theme parks, streaming, cinema, merchandise. According to stockcharts.com, now it is the most profitable time to buy stock as the temporal fall of the market proposes a better price and does not decrease the value of the stock in a long-term perspective (Figure 1). My final goal is to earn $500 within 5 years of investment, and investing in a sustainable and strong brand as Disney will help me achieve it.
References
Sahadeo, C. (2018). Saving and investing. Palgrave Macmillian, Cham.
Stockcharts. Web.