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Investment Options

Evaluating Investment Options

Every successful investor starts with a savings account insured by an FDIC-insured financial institution, but that’s just the first step. Whether your employer offers you a retirement plan or you choose an individual option, you’ll eventually be evaluating investment choices. You may even want to explore the stock market, and one day you might even have your very own financial advisor.

It doesn’t all happen at once. And there are different kinds of options for savings and investing that have different benefits and disadvantages. They include:

  • Savings Accounts and Certificates of Deposit
  • Retirement Plans
  • Stock Market
  • Financial Advisors

To find out more about investment options, visit:

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Savings Accounts

If you’re looking for an easy way to start saving, open a savings account at your local national bank or credit union.

  • Low minimum opening deposit
  • No minimum deposit amount
  • Insured by the Federal Deposit Insurance Corporation
  • Funds may be accessed by going into a bank branch or withdrawing from an ATM
  • Account may be managed through on-line banking
  • Earns interest

Remember, some fees may be charged. Compare fees of multiple financial institutions before selecting where to save.

Certificates of Deposit

Certificates of deposit usually pay a higher interest rate than traditional savings account but– your funds are locked in for a specified period of time. The longer you agree to keep your funds invested, the higher the interest.

  • Usually requires a minimum deposit of $1,000
  • Terms range from 7 days to 10 years
  • Interest rate is “locked” for the term of the deposit
  • Deposit may not be added to
  • May be a penalty for early withdrawal
  • Insured by the Federal Deposit Insurance Corporation

Retirement Accounts

The time to start planning for your retirement is when you interview for your first job! You’ve probably heard of a 401(k) and your employer may offer one, so it’s best to know what one is.

  • Established by an employer
  • Employee contributions are made on a pre-tax basis
  • Employers may offer a matching contribution
  • Interest accrues to the plan
  • Maximum contributions limits are set by the Internal Revenue Service
  • Other types of retirement plans that an employer may offer is Profit Sharing, Defined Benefit Plans or Stock Option Plans

Okay, so your first, second or even third employer may not offer retirement plans, but that doesn’t mean you can’t open your own at a financial institution. Here are some options to save towards retirement:

  • Individual Retirement accounts or IRAs
  • Traditional IRAs
  • Contributions may be tax deductible
  • Generally, amounts in an IRA, including earnings are not subject to federal taxation until distribution
  • Annual contributions amounts are subject to IRS limits
  • Required minimum distributions (withdrawals) must begin following age 70 1⁄2

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Stock Market

Now you’re ready for the big dance. You’ve played it safe until now by investing in federally insured savings accounts and certificates of deposit…. now you’re looking for the big return. Do you accept advice from your best friend who heard someone talking on the subway, or do you do your own research like a true UMBC scholar?

  • Check out the company’s history, their successes and failures
  • Does the company perform better than its competitors
  • Is there a market for their stock if you need to sell
  • Check the company out on the U.S. Securities and Exchange Commission web site
  • Don’t invest any money that you can’t afford to loose

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Basics of Purchasing and Selling Stock