Cash Equivalents

Cash equivalents are any investment that can easily be turned into cash (without losing much, if any, in the conversion process due to fees, etc.) Any fixed-income investment that matures in less than one year is considered a cash equivalent. This can include Treasury bills, one-year (or less) certificates of deposit (CDs) or guaranteed investment contracts (GICs), and money market accounts or mutual funds.

Convertible Securities

Convertibles are hybrid securities; in other words, they combine the characteristics of two different types of investment instruments. Hybrids are found in two basic forms: convertible bonds and convertible preferred stock. These bonds and preferred stock can be exchanged for (or, converted to) a specified number of the issuing company's common stock shares at the option of the convertible holder.

Bond Risks

Although many bonds are considered to be quite safe, investing in the bond market as a whole is not without its risks. All bond instruments carry risk, but the degree of risk varies with the type of debt and the issuer. There are several different types of risk, and you should be aware of how these affect your bond investments. By recognizing and understanding the different levels of risk for each type of bond, the total risk can be better managed in the construction of an effectively-diversified bond portfolio.

Corporate Bonds

Investors who desire a higher rate of return than that offered by Treasury securities, and are willing to expose themselves to more risk in order to obtain it, often consider investing in bonds issued by corporations. While corporate bonds pay a higher interest rate than do government offerings, they also are inherently riskier instruments because they stand not on the faith of the federal government but upon the financial strength and integrity of the company that issues them.

Dividends and Dividend Investing

A dividend is a profit distribution paid by a company to its shareholders. The profits may originate from normal company operations or from the organization's investment activities. The company's board of directors determines and declares cash dividends periodically – typically on a quarterly, semiannual, or annual basis. They can be paid to shareholders in the form of cash or as additional shares of company stock, though stock dividends are usually only issued when the board wants to reinvest cash profits to fuel future company growth.

Are Bonds still a good Investment?

Common stocks represent ownership in a corporation; whereas bonds are literally IOUs, thereby making bondholders creditors of the company. Stockholders, as owners of the corporation, have a claim to income and assets and are entitled to voting rights.

Investing in Your Employer's Stock

As an employee, you could simultaneously be in both the best and worst positions to analyze the financial prospects of the company you work for. Ideally, you're in the best position to know whether your products or services are selling well, whether or not you're reaching performance goals in terms of revenues and profits, and whether upper management has a strong vision for the future.

Stock Picking for Beginners

Generally, there are five basic methods that the investing public uses to identify and purchase the stocks they buy. This is not to imply that any particular investor employs more than one or two of these techniques (which can be either very good or very bad, depending on which end of the list you're talking about).

Stock Dividends and Splits

On occasion companies choose to conserve their useable cash by paying their shareholders with stock dividends, which, as the name implies, are dividends that are distributed in the form of company stock. The organization recapitalizes its earnings and issues new shares, which has no effect on its total assets and liabilities. Stock dividends are usually expressed as a percentage of the number of shares that the company has outstanding.

The Basics of Stocks and Bonds

Stocks and bonds are two of the most common investment securities available. They, along with mutual funds, are generally considered to be staples of a well-diversified, solid investment portfolio. We will attempt in this article to focus on the basics of stocks and bonds. Let’s begin with a look at bonds.