What would you do with $25,000?
Zeb White's investment plan
First Investment: Checking Account ($5,000)
A convenient, conservative investment
- I would deposit $5,000 into a checking account. This account works by lending money to a bank, and I have easy access to my money.
- What are the expected benefits of the investment or how does it potentially earn money? I hardly have any chance of losing money with this kind of investment, so I know that my money is safe and secure. Also, I can easily use a checking account to pay bills.
- This is low risk, so I shouldn't lose money.
- I could invest this money in a bank like J. P. Morgan Chase.
Second Investment: Mutual Fund ($10,000)
A smart, moderate investment
- A mutual fund is a moderate investment where you share the ownership of multiple companies. It is somewhat similar to stocks, but safer because you spread out your money between different companies. It requires a minimum amount of money to invest.
- If the companies that I invest in do well overall, I have the potential to make money--much more money than a traditional checking or savings account. There is a pretty good chance of making a good return, but it takes more time than stocks.
- There is a moderate amount of risk involved; however, the fact that a mutual fund invests in multiple companies safeguards my money to an extent.
- Fidelity Investments is a company that provides well-respected mutual funds.
Third Investment: The Stock Market ($10,000)
A risky, agressive investment
- The stock market works by people like me buying shares of a company. If the company does well, the value of the shares goes up and I can sell them to make a profit, but if the company does poorly I could be stuck with low-value stocks. It is an aggressive investment.
- If the companies that I invest in do well, I have the potential to make a lot of money by selling my shares after the prices go up.
- This is a high risk investment, because the company that I invest in could decrease in value, or worse, go out of business. This would cause me to lose a lot of money.
- Apple is doing great on the stock market today, so it's a company that I would invest in.
My Investment Plan: Explanation
If I were given $25,000, I would have a lot of options as to how I could invest the money. I decided to allocate my money to a checking account, a mutual fund, and stocks. It's important to use different kinds of investment because diversification decreases risk and give you more potential for a good rate on return. The mutual fund and checking account have different interest rates because they serve different purposes. I would use the checking account more often and the mutual fund is more long-term. It's important to consider all the different ways to invest money, and I think my plan covers the bases pretty well.