Addriann Huie Fin 340 Journal One

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Southern New Hampshire University *

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Feb 20, 2024

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Addriann Huie Fin 340 Fundamental of Investment Module One Journal Southern New Hampshire University Professor Jennifer Facini March 2, 2023

1. Short- Term Investments are temporary financial investments that can easily be converted to cash. The advantage of a short-term investment is that they are high liquidity and low risk. Investors tend to use short-term investments as a place to park funds before deciding where to invest long-term (Smart, 2020). The disadvantage to short-term investment is that these investments can be affected by inflation and market interest rates. When rates fall, the return on the investment will follow. However, the low return versus long-term investments may make an investor weary of this investment. Types of short-term investments  Money Market Mutual Fund are mutual fund that are invested in short term investments. They are professionally managed securities that has fast liquidity (Smart,2020). This fund is for the investor that wants a low-risk investment. Some funds can charge a fee. A disadvantage that should be noted with this investment is that it is not FDIC insured. A disadvantage to this fund is that it isn’t suitable as a long-term investment. It can be non-tax or taxable depending on the portfolio.

• United Stated Treasury Bills an investment back by the treasury department with a maturity date of a year or less, making this investment short-term. You can purchase this investment from the U.S. treasury, which is a low-risk option form of investing, and they have a safety rating of A++. They are issued weekly at an auction, exempted from state and local taxes, and sold at a discounted rate (Smart,2020). A disadvantage to this investment can be the return being erased by inflation. 2. Stock is a type of security that gives stockholders a share of ownership in a company, which can also be called equities. Companies issue stock to raise money to finance operations. Investors then buy those stocks to own a portion of the company and the ability to earn a return on the investment. • Preferred stock represents an ownership interest in a corporation and has no maturity date. Preferred stock has a fixed dividend payment, and the stockholders have no voting rights (Smart, 2020). Lastly, the firm is generally required to pay dividends on preferred shares before they pay shares on common shares (Smart,2020). Risks you may incur with preferred stock are liquidation, interest rate risk, call risk, and limited voting rights. • Common stock shares entitling their holder to dividends that vary in amount. It is an equity investment into a corporation, and the shareholders have voting rights. The return from the stock can come in the form of dividends and capital gain. Common stock can be a better performer than bonds and preferred shares. A risk to common stock can be a market risk. The company may lead to profit being diminished over time. Also,

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preferred common stocks are paid out before common stocks and may not be paid until the company begins to have capital. 3. Fixed Income is investments that offer a periodic cash payment that may be fixed in dollar terms or vary according to a predetermined formula (Smart,2020). Some have guaranteed returns making the issuer obligated to pay out.  Bonds are issued by corporations, governments, state, and treasury that give a known interest return and value at maturity. Bonds are long term investments and a fixed security. When someone buys a bond, they give the issuer a loan, which they agree to pay on a specific date while paying interest along the way, usually twice a year. Disadvantage, corporate bonds have more risk because they are not fully backed by the U.S. government. But they will have a slightly higher return because they aren’t backed fully by the government. Like other securities bonds have been a risk with interest, credit risk, liquidity risk and market fluctuation. However, the greater the risk of the bond the greater the return can 4. Other  Exchange- Traded Funds (ETF) is a fund that is traded on the stock exchange. Which gives investor the ability to buy and sell ETF at market price, allowing them to purchase low and sell before the stock tanks. ETFs are low- risk investment. To a acquire an ETF it is low cost giving many income subsets the ability to purchase. Disadvantage to ETF’s are low dividend yields (Segal,2022).If the market turns so will ETF’s.

 Mutual Funds is a portfolio of stocks, bonds, or other assets purchased with a pool of funds contributed by many different investors and managed by an investment company on behalf of its clients (Smart, 2020).

Smart, S. B., & Zutter, C. J. (2020). Fundamentals of investing . Pearson Education Limited. Segal, T. (2023, January 17). Money market funds: What they are, how they work, Pros and Cons . Investopedia. Retrieved March 5, 2023, from https://www.investopedia.com/terms/m/money-marketfund.asp Stocks | Investor.gov. https://www.investor.gov/introduction-investing/investing-basics/investment-products/ stocks

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