Investing In My Future

Posted: August 26th, 2021

Investing In My Future

By

(Student’s Name)

FIN100: Principles of Finance

(Instructor’s Name)

(Date)

                                               Investing in My Future

Introduction

              In this discussion, an examination of investment options is assessed to identify three areas of investing in the future and selecting the best investment methods. The review concludes by outlining related challenges about investing in my future.

Three (3) Ways I will invest in My Future

Based on the principles of finance discussed in this course, ways of investing in the future include stocks, investment in bonds, and mutual funds. These avenues provide good returns given a proper portfolio combination(Davis, 2018).A bond refers to fixed-income security offered as a loan to an investor with prescribed returns over a given period. Bonds are used by municipalities, companies, sovereign governments, and states to finance operations and projects(Davis, 2018). Further, a stock, also referred to as equity, is a security that constitutes the ownership of part of a company. Buying shares implies that the owner is entitledto a portion of the cooperation’s assets and profits equal to the stock they own(Davis, 2018). On the other hand, mutual funds are investments that allow pooling of money with other investors to buy shares of stocks, other securities, and bonds collectively called a portfolio. The unique aspect with mutual funds is that the investment is placed under a third party, therefore, implying that the investor will not have direct decisions on the overall investments.

My Confidence Concerning Investing in My Future

Amongst the three ways of investment, I am confident in investing in mutual funds.The mutual fund’s investment approach provides a diverse range of securities through which an appropriate portfolio can be selected before executing a well-versed investment plan(Davis, 2018). Besides, the venture offers an opportunity to source for professional managers with expert backgrounds on the management of portfolios(Davis, 2018). As such, the portfolio manager will be responsible for buying and selling of stocks or bonds as deemed appropriate while the investor pays a certain agreed fee. Besides, the risks under mutual funds are grossly shared or, in some cases, transferred to the mutual fund’s management firm; thus, the investor suffers less in case of uncertainty. Further, the method is less time consuming and highly convenient since it will be upon the management to devise strategies for monitoring and overseeing investment decisions on my behalf(Davis, 2018; Cagan, 2016). Hence, given that I do not have time at my disposal, the mutual fund’s approach is the most appropriate investment avenue.

Other advantages compounding reasons for preferring mutual funds as an investment avenue are that it enjoys low economies of scale hence low costs of transactions. The mutual fund’s schemes attract many investors, which provides large amounts of capital that are invested in bulk, thus attracting discounts and reduced charges(Davis, 2018). Therefore, this is less costly, unlike when costs are incurred individually in other forms of investment, such as stocks and bonds(Cagan, 2016). Besides, most schemes embrace transparency since they are monitored by other external bodies. Hence, this serves to ensure the security of my venture capital.

Challenges with Investing in My Future

The investment I perceive to be the most challenging is a stock investment. Buying stock requires understanding the investment mechanism. In this case, it requires that one understands the business model adopted by the company. Equally, it is a complicated affair, especially for someone without investment knowledge(Cagan, 2016). Moreover, there is a possibility of becoming overexcited with company performance, which may eventually undermine objective investment decisions. However, these challenges can be overcome by first getting to learn investment strategies before making investment decisions(Cagan, 2016; Davis, 2018). Thus, this will limit risk exposure, thereby enhancing individual performance in the investment. On the other options, mutual funds appear less risky and challenging(Cagan, 2016). Through a perfect diversification, with a qualified team of portfolio management, it is possible to attain desired investment goals, which are favorable profits with limited exposure to risks.

Conclusion

            The three investment methods discussed here include bonds, stocks, and mutual funds. The mutual fund’s methods appear the most appropriate because it is easily managed, enjoys relatively high returns with limited risk levels. Thus, the discussion appreciates the other two ways, but they fail to meet the desired qualities of low risks compared to the mutual funds.

References

Cagan, M. (2016). Investing 101: from stocks and bonds to ETFs and IPOs, an essential primer on building a profitable portfolio. Avon, Massachusetts: Adams Media.

DAVIS, J. (2018). INVESTMENT TRUSTS HANDBOOK 2019: investing essentials, expert insights, and powerful trends … and data. Place of publication not identified: HARRIMAN House Publishing.