Finance 101: Building A Solid Financial Foundation

[knightdream]

8 Financial Tips For Young Adults
by Amy Fontinelle

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you're out in the real world for the first time. If you think that understanding personal finance is way above your head, though, you're wrong. All it takes to get started on the right path is the willingness to do a little reading - you don't even need to be particularly good at math.

To help you get started, we'll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.

1. Learn Self Control
If you're lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you'll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it's better to wait until you've actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? (To learn more about credit, check out Understanding Credit Card Interest and our Debt Management feature.)

If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don't carry more cards than you can keep track of.

2. Take Control of Your Own Financial Future
If you don't learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they're doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you're armed with personal finance knowledge, don't let anyone catch you off guard - whether it's a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you. (To find out how to have fun and still save money, see Budget Without Blowing Off Your Friends.)

3. Know Where Your Money Goes
Once you've gone through a few personal finance books, you'll realize how important it is to make sure your expenses aren't exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you'll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don't waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it. (Read more on budgeting in our Budgeting 101 special feature.)

4. Start an Emergency Fund
One of personal finance's oft-repeated mantras is "pay yourself first". No matter how much you owe in student loans or credit card debt and no matter how low your salary may seem, it's wise to find some amount - any amount - of money in your budget to save in an emergency fund every month.

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly "expense", pretty soon you'll have more than just emergency money saved up: you'll have retirement money, vacation money and even money for a home down payment.

Don't just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit or a money market account. Otherwise, inflation will erode the value of your savings.

5. Start Saving for Retirement Now
Just as you headed off to kindergarten with your parents' hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you'll have to invest to end up with the amount you need to retire, and the sooner you'll be able to call working an "option" rather than a "necessity".

Company-sponsored retirement plans are a particularly great choice because you get to put in pretax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money. (To learn more, see Understanding The Time Value Of Money and Retirement Savings Tips For 18- To 24-Year-Olds.)

6. Get a Grip on Taxes
It's important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you'll be left with, which is also known as net, or take-home pay.

For example, $35,000 a year in California will leave you with about $27,600 after taxes in 2008, or about $2,300 a month. By the same token, if you're considering leaving one job for another in search of a salary increase, you'll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won't give you an extra $6,000, or $500 per month - it will only give you an extra $4,200, or $350 per month (again, the amount will vary depending on your state of residence). Also, you'll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there. (To learn all about your taxes, visit our Income Tax Guide.)

7. Guard Your Health
If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you're uninsured, don't wait another day to apply for health insurance; it's easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you'll thank yourself down the road when you aren't paying exorbitant medical bills.

8. Guard Your Wealth
If you want to make sure that all of your hard-earned money doesn't vanish, you'll need to take steps to protect it. If you rent, get renter's insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset - the ability to earn an income - by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.

If you want help managing your money, find a fee-only financial planner to provide unbiased advice that's in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs. You'll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds and mutual funds. (Find out all you need to know about insurance in Understand Your Insurance Contract, Five Insurance Policies Everyone Should Have and Insurance 101 For Renters.)


A Financial Basis for Life
Remember, you don't need any fancy degrees or special background to become an expert at managing your finances. If you use these eight financial rules for your life, you can be as personally prosperous as the guy with the hard-won MBA.

source link: 8 Financial Tips For Young Adults

[knightdream]

up... up... up... for today!

keep visiting this thread. more financial tips will be posted here soon!!!

[Fincon]

hi thank you for attending our Enrich Seminar!

[Efren7962]

Deep in Consumer Debt? SMILE!

Efren Ll. Cruz, RFP®

(This article was featured in Business Mirror.)

Debt is death to those who abuse it. But what are you to do if you find yourself buried under a ton of consumer debt?

Well, the last thing that you should do is to frown to the point of making your eyebrows appear like they’re shaking hands. On the contrary, the first thing that you should do is SMILE!

I recommend smiling not so much to deny the existence of a consumer debt problem but more to conjure up the strength and resolve to attack a tough one. The act of smiling is nature’s pain killer and muscle relaxant. Smiling allows us to calm our emotions and think clearer. One tip though, we must smile honestly and profusely; in other words, we should smile with our whole being. Many times, this honest and profuse smile is manifested in smiling with our zygomatic major and orbicularis oculi muscles, which is smiling with our mouths and our eyes.

There is recent talk about DaVinci. Well, we all know that the world’s most famous smile is that of Mona Lisa, as painted by Leonardo DaVinci. However, if we look closely at Mona Lisa, she seems to display only a half smile. In fact, the University of Amsterdam ran an emotion recognizing software on Mona Lisa and found that she was only 83% happy while being 9% disgusted, 6% fearful and 2% angry. So sport a full and honest smile when you find yourself in deep consumer debt trouble.

Of course, smiling is just the beginning. Immediately after developing the proper disposition, we should begin to buckle down to solve our consumer debt problem.

The basic solution to solving debt problems is through restructuring to make debt repayment more manageable. The reason is that most debt problems occur because the debt that is over due needs to be paid within a very short period of time. Restructuring would allow you to repay your debt over a longer period of time and hopefully at a lower interest rate (and not just because of the absence of penalty charges). Please note, however, that while a lower interest rate may be charged, the total absolute amount of interest to be paid may be higher because of the length of the repayment period for the restructured debt. As a rule of thumb, therefore, you should restructure your debt over the shortest time and most affordable amortization level as possible.

The cheapest way to restructure is to borrow from relatives at concessional rates and then repay them over a number of years. You could raise an amount equal to your total outstanding debt and pay off all creditors, leaving behind just your relative to repay. The irony of it all, however, is that relatives tend to disappear during such times of need.

If relatives do become inaccessible, you could always negotiate restructuring with your creditors themselves. Creditors would rather get paid than have to run after your assets, especially if your assets are other than cash.

A better way of negotiating is to consolidate your debt with just one creditor instead of a couple. That way, you need to think of just one creditor, one amortization amount and one date on which to repay your debt. On the assumption that your credit standing is still good, consolidation can be facilitated by the balance transfer facilities of your credit cards, getting a home-equity loan or line or even borrowing against the cash value of your life insurance (assuming it is sufficient). In consolidating debt, just be aware that some creditors use “Add On Rate” or “AOR” in computing interest.

AOR computes your monthly interest expense based on the original loan amount, regardless of the amount of the loan that you have already paid up. The amount of monthly principal repayment, which is added to the monthly interest payments, is computed by simply dividing the original loan amount by the term of the loan. If you want to know the effective rate of an AOR offer, you may use the calculator that comes with my book, “Pwede Na! The Complete Pinoy Guide to Personal Finance.”

Sometimes, consolidating debt will not be enough. This is when you may want to sell some of the assets that you really don’t need like that 4th TV, your MP3 player, excess clothes and shoes etc. Do an “ukay, ukay” garage sale and you could realize a small fortune out of your excess assets.

You may also try to augment your income by performing a service. Don’t just go jumping into going into any business as that business may require a lot of money as well – something that you are currently short of. Rather, perform a service that you can do from home or do with little capital. Needless to say, the service must be moral.

Lastly, stay debt free. You’ve been through hell and back. Don’t fall into the same hole again.

[knightdream]

Deep in Consumer Debt? SMILE!

Efren Ll. Cruz, RFP®

(This article was featured in Business Mirror.)

Debt is death to those who abuse it. But what are you to do if you find yourself buried under a ton of consumer debt?

Well, the last thing that you should do is to frown to the point of making your eyebrows appear like they’re shaking hands. On the contrary, the first thing that you should do is SMILE!

I recommend smiling not so much to deny the existence of a consumer debt problem but more to conjure up the strength and resolve to attack a tough one. The act of smiling is nature’s pain killer and muscle relaxant. Smiling allows us to calm our emotions and think clearer. One tip though, we must smile honestly and profusely; in other words, we should smile with our whole being. Many times, this honest and profuse smile is manifested in smiling with our zygomatic major and orbicularis oculi muscles, which is smiling with our mouths and our eyes.

There is recent talk about DaVinci. Well, we all know that the world’s most famous smile is that of Mona Lisa, as painted by Leonardo DaVinci. However, if we look closely at Mona Lisa, she seems to display only a half smile. In fact, the University of Amsterdam ran an emotion recognizing software on Mona Lisa and found that she was only 83% happy while being 9% disgusted, 6% fearful and 2% angry. So sport a full and honest smile when you find yourself in deep consumer debt trouble.

Of course, smiling is just the beginning. Immediately after developing the proper disposition, we should begin to buckle down to solve our consumer debt problem.

The basic solution to solving debt problems is through restructuring to make debt repayment more manageable. The reason is that most debt problems occur because the debt that is over due needs to be paid within a very short period of time. Restructuring would allow you to repay your debt over a longer period of time and hopefully at a lower interest rate (and not just because of the absence of penalty charges). Please note, however, that while a lower interest rate may be charged, the total absolute amount of interest to be paid may be higher because of the length of the repayment period for the restructured debt. As a rule of thumb, therefore, you should restructure your debt over the shortest time and most affordable amortization level as possible.

The cheapest way to restructure is to borrow from relatives at concessional rates and then repay them over a number of years. You could raise an amount equal to your total outstanding debt and pay off all creditors, leaving behind just your relative to repay. The irony of it all, however, is that relatives tend to disappear during such times of need.

If relatives do become inaccessible, you could always negotiate restructuring with your creditors themselves. Creditors would rather get paid than have to run after your assets, especially if your assets are other than cash.

A better way of negotiating is to consolidate your debt with just one creditor instead of a couple. That way, you need to think of just one creditor, one amortization amount and one date on which to repay your debt. On the assumption that your credit standing is still good, consolidation can be facilitated by the balance transfer facilities of your credit cards, getting a home-equity loan or line or even borrowing against the cash value of your life insurance (assuming it is sufficient). In consolidating debt, just be aware that some creditors use “Add On Rate” or “AOR” in computing interest.

AOR computes your monthly interest expense based on the original loan amount, regardless of the amount of the loan that you have already paid up. The amount of monthly principal repayment, which is added to the monthly interest payments, is computed by simply dividing the original loan amount by the term of the loan. If you want to know the effective rate of an AOR offer, you may use the calculator that comes with my book, “Pwede Na! The Complete Pinoy Guide to Personal Finance.”

Sometimes, consolidating debt will not be enough. This is when you may want to sell some of the assets that you really don’t need like that 4th TV, your MP3 player, excess clothes and shoes etc. Do an “ukay, ukay” garage sale and you could realize a small fortune out of your excess assets.

You may also try to augment your income by performing a service. Don’t just go jumping into going into any business as that business may require a lot of money as well – something that you are currently short of. Rather, perform a service that you can do from home or do with little capital. Needless to say, the service must be moral.

Lastly, stay debt free. You’ve been through hell and back. Don’t fall into the same hole again.

great post. thanks bro. keep it up!

[maila_yham]

Bro, ako nalang ipost dri kay dli man masendan ka ug reply.

Yup taga-TC pud ko bro. I know Engr. Cagasan. Ang dli nako malimtan nga maestro sa CompE kay c Maderazo..heheh. Batch 2003 ko. CompE from 1st-3rd yr then 4th-5th ECE nako. So, ECE jud ko graduate. PagNov2003 ko gaboard sa ECE.

With regards to IMG, classmate mi ni Joan Ling. I was the one who orient & made the site tour for Crown Asia projects for Jess, Joan and their associates..that was on 2007 kay Marketing Director man ko sa Crown from 2007 until i separated from them on late 2008 and made my own real estate company.

Magstorya unya mi ni Jess puhon if i have the time na kay bz pajud kaau.

Congrats to u and ur endeavors.

Sir, curious lng. . unsa man ning IMG

[knightdream]

hi thank you for attending our Enrich Seminar!

you're always welcome. looking forward to see u again for the same endeavors in the future.

u may post ur ideas here. this thread is open to people who wanted to share their knowledge about financial education.

[knightdream]

Sir, curious lng. . unsa man ning IMG

hi maila_yham,

i've sent u a PM. pls check ur mailbox.

[knightdream]

8 EXTREME Personal Finance Dos in 2010

Since we are now living in one of the worst time of the economic crisis of all time, we should always take the right decisions when it comes to our financial life. This article is going to teach you what the financial experts are saying that we should do.
You will find 10 things that you have to do in order to improve your financial life:

#1. Keep a good amount of cash in your account/pockets.

Even if you probably have a very stable job and you are not worried about losing it, in case you will raise a so called “rainy day” fund, you will definitely going to have a good peace of mind and live a better life.

Some financial experts are saying that you should make that fund of $12k or more, while other guides are saying that it should be 6 to 9 months of your current living expenses. With the help of this emergency fund you will get the chance to avoid selling your current investments in order to pay some emergency expenses that you weren’t expecting to come.

#2. It’s time to invest internationally.

Even if the financial crisis started in United States, you can start investing internationally; you can always use the internet to find different things in which you can invest your money. The overseas economies like China for example were probably hit hard right now but if you will look at it on long term things are looking a lot better than in United States.

#3. Always diversify your investment, and don’t search for just one winning investment.

In case you will put all your money into stocks of one company and that company will go bankrupt, your money will be all gone, this is why we suggest that you do not keep all your eggs in just one basket.

Most financial experts are saying that you should not try to pick just one winning idea and put all your money and efforts into that, you should always diversify the markets and the investments that you are about to make.

#4. Save money by taking into consideration some energy efficiency facts.

The internet is nowadays filled with many great articles about how you could save money by consuming less energy. This means electricity, gas and other types of energy. The moment you will start to apply those environmental friendly concepts you will see for yourself that you will be able to keep more money in your pocket.

#5. Continue to contribute to your 401k or any other retirement plans that you have.

The money that is earned during tough times of the economy is worth a lot more than the money that is made in a normal and growing time. This is why the dollar that you will save today and put it in your retirement plan is going to be worth a lot more the moment you will retire.

#6. Leave below your means so that you will be able to save money.

You can invest in your future only by using the money that you are able to save. You can use the money that you save every month to build a better future for you and your family. In case you are currently not able to save any money you should definitely check out the methods that can be used to save the money.

#7. Do not make any sudden moves and stay calm.

You should not sell all your stocks just because during one day, they have fallen a lot, you should always stick to the investment plan that you had. The markets might start to be more volatile these days but in case you will start taking action too soon you will definitely regret it in the future.

#8. Start paying those expensive debts (credit cards and any other unsecured loans)

In case you do have some expensive debts, it is the right moment to start paying that, since the interest rate is only going to take a lot of your hard earned cash that you have. Make sure that you get rid of those high interest rate or those debts that are non tax- deductible.

In case you want to get rid of credit card debt at the lowest possible costs we suggest that you consolidate your credit card debt. This way you will no longer have to pay those high interest rates for the credit card debt that you have.

Source link: 9 EXTREME Personal Finance Dos/Tips in 2010 |Free Debt Consolidation – Consolidate Debt Now!

[lorenzoleo]

Bo Sanchez’s Truly Rich Financial Coaching Program (Day 2)



Since my wife and I were late during the first day of the Truly Rich Financial Coaching Program, we wanted to make the most of the seminar by being early on the second day. Before 8AM, we were already on our way to Valle Verde Country Club. Since it was a Saturday, there was not much traffic jam and we arrived a little around 8:15AM. Thinking that we were early, my wife and I sat on one of the benches outside the room. I saw the room where we had the seminar yesterday and noticed that some people were already preparing the place. I thought to myself, maybe in no time they’d be done preparing the place and we will be sitting comfortably inside the room. After a few minutes, brother Bo arrived with his usual winning smile. He saw us and invited us to go inside. Thinking that he was going to where the waiters were preparing, we hesitated a bit. Only when he entered the OTHER room beside it did we realize that we were looking at the wrong room. When we followed Bo and entered the room, there were already many people inside, some of them having a great time drinking their morning coffee. I couldn’t keep from laughing at myself for thinking and being proud that we were the early birds for the day.
Basic Foundation of Financial Planning
The first speaker was Noel Arandilla, from International Marketing Group (IMG). He talked about the basic foundation of financial planning. He shared some tips to having better finances like increasing your cash flow, building long term asset allocation, how to compute the right amount of insurance that you need, and more.
I learned that there are only two things you can use to generate cash flow: time and money. We all have 24 hours in a day. But how you use your time determines whether you become rich or poor. For most people, the only time available to become rich is after work or during weekends, that is – spare time. It is very important to utilize the spare time that you have in money-making generating activities and not waste it on watching TV, sleeping, gossiping, and more.
Noel also shared that a person normally starts out in life with very little or no money but with lots of responsibilities. For example, he has to help his parents with household chores, he may need to send his younger bother or sister to school, or earn a living to help with the family’s finances . After a few years of getting his paycheck, the typical person would earn a little bit more each year while his responsibility gradually decreases. Once he reaches retirement age, all of his kids have probably graduated by then, hence he would have minimal responsibility. At this stage, he’s supposed to have money working for him to fully enjoy the remaining years of his life. That is the purpose of financial planning.
Be the Bank!
May I tell you a little secret? Do you know how the bank earns money? Let me illustrate the answer by using an example. After spending 2 years as an OFW, you have a little extra cash that you don’t really expect to use for the next 30 years. Let’s say you have 100,000 pesos in total. Now, being a saver, you deposited the whole 100,000 pesos into a time-deposit account at 5% annual interest for 30 years. Right after you left the bank, a business man came in, asked the banker for a loan of 100,000 pesos payable in 30 years at 15% annual interest. The banker than says “OK”, took the 100,000 pesos from your time-deposit and gave it to the business man. After 30 years, the bank’s 100,000 pesos loaned to the businessman has already earned around 6.4 million pesos including interest, while your 100,000 pesos invested in time-deposit earned only about 400,000 pesos. When you claim your time-deposit earnings, the bank give’s you the 400,000 pesos, then keeps the remaining 6 million as profit. I’d love to be bank!
How you’re losing money from your savings account
In the Philippines, most people still invest by saving their money into banks over a long period of time. The bad news is this. Banks are offering very minimal interest rate on savings and time deposits. With less than 1% annual interest rate on your savings account, what future does your money hold? Counting average inflation of 7% per year, you are actually losing money at the rate of -6%. This is because of inflation. Inflation is the effect of steadily appreciating prices of goods. For example, your 100 pesos can buy 5 loaves of bread 20 years ago. But today, the same 100 pesos could NOT even buy 1 loaf of bread. The same thing is happening, when people say “if only I bought that piece of land 20 years ago, today, I would already be a millionaire!”
Start early. Invest your money for the long term.
I love the way Noel spoke about ordinary experiences and making them as great examples of interesting financial decisions. For example, you get your 13th and 14th month bonus today worth around 40,000 pesos. The question is, would you save and invest it on a mutual fund at 10% average interest rate? Or would you buy another NEW mobile phone? For some, the answer is simple – buy a mobile phone for “pogi” (handsome) points. For others, they would hesitate quite a bit but eventually give in, saying “I’ll just invest my next year’s 13th and 14th month bonus. For now, I’ll buy myself a gift. I deserve it. My brand new cellphone, here I come!” For those a little bit financially savvy, they might invest it through mutual funds, or stocks, potentially earning even better average annual returns around 15 – 20%. For most people, it is hard to invest because earning an interest over a long period of time is NOT tangible RIGHT NOW and you need time to make it work. The delusion of instant gratification is the enemy of long-term investing.
Money is flowing
The second speaker is also from IMG. He shared his personal observation about how rich people in the Philippines spend their money. He noticed that Henry Sy, Lucio Tan and other billionaire tycoons move their money around. In a way, they are actually just buying from themselves. For example, Henry Sy who owns the very popular SM department stores, is renting mall space for his department stores from SM properties, which is a different company but still owned by the same family. When SM properties build new malls or residential buildings and need money, who do they ask money from? Instead of borrowing from other banks, they borrow from their own bank – BDO, which, is owned by the same man, Henry Sy. The same is true with Lucio Tan. When his Philippine Airlines and several tobacco companies need money to finance its projects and investments, from which bank does it borrow money? Of course, through Allied Bank or Philippine National Bank, which Lucio Tan owns a stake. So you see, money is just flowing around, being controlled by the same rich people who owns most businesses, selling high quality goods and providing world-class services for our countrymen. Wouldn’t it be nice to be able to do the same thing? Wouldn’t it be nice to buy from yourself and save on costs? You might even want to give yourself a hefty discount as part of your loyalty program. Who wouldn’t want to be a loyal customer to one’s self?
Mutual funds
The idea of mutual funds, I learned, is making investing available to ordinary citizens. Each person invests a small amount, as little as 5000 pesos. The money from all the investors are then pooled together and invested into money generating assets like bonds, stocks or both. The money is managed by professional fund managers. The goal of the fund manager is to make money for the small investors. Whether you invested big money or not, you earn the same profit percentage as that of the group.
This is particularly beneficial for ordinary citizens who don’t have much time and money to participate actively in managing the investment and content to just leave their money to professional fund managers.
One way to minimize risk, is to use an investing method called peso cost averaging. It is an investing technique based on the assumption that since you’re unable to time the market, you just try to average out the risk by investing same amount of money every month or every quarter to take advantage of the times when the price of the stock/net asset value per share (for mutual funds) becomes very low. Even though the price is fluctuating, or is going roller coaster, the risk is minimized as the same amount of money can buy more shares when the stock price is low. When the price is up you can either take away your profit/earnings or leave it there to earn compound interest. It is advisable to maintain a long term outlook on your investments like a 10 or 20 year time frame in this scenario. If you need the money within 1 year or 3 years, it is best to leave it at the bank where it is safe and liquid.
There are also different types of mutual funds: 1) bonds & securities, 2) stocks & equities, and 3) combined. Mutual funds which invest in company or government bonds & securities are stable but offer limited earning potential. These funds are especially designed for those that are risk-averse and those that are already retiring and don’t want to spend their time analyzing funds for themselves. The mutual funds which invest in stocks have high growth potential but also entails higher risk especially during times of booms and recessions. This is advantageous for those still young and can tolerate the swings in the market that even if they lose money, they can still go back up. The upside is that if they make money, they earnings is also big.


Source : Bo Sanchez’s Truly Rich Financial Coaching Program (Day 2) Rich Money Habits