Investments

investments

2006 I . Money Market Fund

Money market fund is basically mutual fund that has return more than pay of demand deposits but less than a 6-month Certificate of Deposit (CD However , this type of investment is short term , which means that investors can only invest in this type of investment less than 1-year of period . Interestingly , money market fund is highly liquid and low risk (Fidelity Investments , 2006

If we have a 10 ,000 bonus that we would to like invest in money market fund , the value of money in the

next ten years will be as following (given the interest rate is 1 .75 and every time it matures , we re-invest all funds to the next one year of money market fund

Compounding Formula ( Future Value (nth year Present Value (1 interest rate ) n

Table 1 Yield of Money Market Funds

nth Year Yield

1 10 ,175

2 10 ,353

3 10 ,534

4 10 ,719

5 10 ,906

6 11 ,097

7 11 ,291

8 11 ,489

9 11 ,690

10 11 ,894 II . U .S . Series I bonds Series

Instead of re-investing our money every year like happens in Money Market Fund , U .S . Series I bonds Series earns interest as long as 30 years . The benefits of this investment are that it enables transfer of ownership and possibility to add co-owners . Similarly , if we have a 10 ,000 bonus that we would to like invest in I bond series , the value of money in the next ten years will be as following (given the interest rate is 2 .41 until October 2006 and using the same compounding formula

Table 2 Yield of U .S . Series I bond

nth Year Yield

1 10 ,241

2 10 ,488

3 10 ,741

4 10 ,999

5 11 ,264

6 11 ,536

7 11 ,814

8 12 ,099

9 12 ,390

10 12 ,689 III . Balanced Mutual Fund

Mutual fund is investment that pools investors ' money to buy stocks bonds , or anything else the fund manager decides is worthwhile . Instead of managing our money ourselves , we turn over the responsibility of managing that money to a professional ( Getting Started . Mutual funds come in many type , one of them is balanced mutual funds , which describe type of funds that are dedicated to buy common stock stock and bonds

If we have a 10 ,000 bonus that we would to like invest in balanced mutual fund , the value of money in the next ten years will be as following (given the interest rate is 5 per year and using the same compounding formula

Table 3 Yield of Balanced Mutual Fund

nth Year Yield

1 10 ,500

2 11 ,025

3 11 ,576

4 12 ,155

5 12 ,763

6 13 ,401

7 14 ,071

8 14 ,775

9 15 ,513

10 16 ,289 IV . Growth Mutual Fund

Growth mutual funds are funds that are dedicated to obtain maximum HYPERLINK "http /financial-dictionary .thefreedictionary .com /Capital 20appreciatio n " capital appreciation that places...