As a graduate student of finance at Florida International University, Christopher Best has significantly expanded his knowledge about investments in the recent years.
When you buy a stock in a company, you own a part of the company. This is why stock investors are called shareholders. Lending investments are different from buying stocks. With lending investments, you lend your money to a company, bank or a government and get your money back in a certain period of time with interest. Lending investments are much more secure compared to stock investments. Because of this, they are not the best choice if you want to significantly grow your money. This being said lending is great for portfolio diversification, current income generation, and short-term investments.
You can find lending opportunities everywhere. Opening a certificate of deposit with your bank is a form of lending, too. Lending investments also include treasury bills, bonds, mortgages, and bond mutual funds. While opening a certificate of deposit with a bank that has a lot of branches in your area can make you feel very secure, operating all the physical branches costs a lot of money. This money comes from bank depositors, which is why the rates your local bank may have are probably very small in comparison to alternatives.
For example, money market funds often offer unlimited check writing and higher-yielding accounts compared to regular savings and checking accounts. Money market funds do not change their value. If you invest in a money market fund, you will earn dividends similarly to a bank account. That’s the basics of investing that students of finance such as Christopher Best learn early during their studies. In addition to higher yields, many money market funds are tax-free and offer you options that conventional banks don’t.