November 11, 2010
Different Types of Investment Choices
According to the problem found in our textbook (Bluman,2005) I have a $1000 to invest with several different choices. These choices are a checking account, money market account, passbook savings account, and certificate of deposit. Through investigation I have found that these seemingly simple accounts are all alike, but are still different in the options that is offered per account. In order to find out the account I will invest the $1000 into I will compare the pros and cons of each account.
When I compare the different accounts to one another the biggest factors I see is that all accounts need to be FDIC (Understanding and Controlling, 1996) insured and that none of the accounts are high risk investments. All of these accounts have interest that can be earned, although the different accounts vary in rates given. On the note of interest being earned, the interest may not be much due to the concept of inflation. For most of these accounts there is fees accessed if the minimum balance is not maintained and there is taxes on the money earned from interest on the account. From what I have found this is where most the similarities end and the differences begin.
If I were to invest the given $1000 into a checking account I would probably spend it faster than much interest was ever made on it. This is simply because of the accessibility and convenience that is available to the checking account. The checking account is basically a storage unit for your money without having the money. The down fall to such convenience is that one might be more apt to spend their money quicker being that their whole account is at their finger tips accentually. I tend to do this on occasion, so I would not recommend a checking account as a savings investment.
If I were to choose the money market account I would still have access to my assets within the account, but...