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immediate with a collection. It builds over time, if at all. Another thing to remember is there may be substantial costs for liquidating a collection, such as an auction fee or commission, all of which diminish profit.
Commodities Raw Materials. If you follow the financial news, you hear a lot about a particular investment called commodities . These are raw materials that are either mined, grown, or drilled for such as metals, coal, cotton, cattle, soybean, and oil. Raw materials are used by companies to manufacture products or provide services. It is very important to these companies that they have a guaranteed future supply of the materials they need at a known price . So, they enter into agreements with providers of these raw materials called futures contracts , which guarantee price, supply, and delivery. Commodities investments are
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Comic Book Crush The Amazing Spiderman #1 was published by Marvel Comics in 1963 and originally sold for 12 cents. Today, copies sell for $40,000 or more.
different from traditional investments because they are not bought to produce an income stream. They are a hedge against price increases or supply shortages. Futures contracts are actively traded. Commodities are complex investments not generally made by individual investors, but it helps to have a basic knowledge and awareness of them. If you want to learn more about commodities and the futures markets, there’s plenty of information online. III. Mutual Funds Strength in Numbers. A mutual fund is a professionally managed investment fund that pools the money of many individual investors in order to purchase large blocks of stock or other securities. When you have a 401K, most of your contributions will be invested in one or several mutual funds. Mutual funds are like baskets of investments selected to meet a particular investment goal or focus. For example, a mutual fund that represents itself as a “Balanced Fund” may hold stocks and bonds of several companies across many industries, as well as Treasuries. A fund that represents itself as a “Growth Fund” may invest in the shares of companies expected to grow at a fast rate. There are even mutual funds that invest only in bonds. Like any investment, different mutual funds have different risk levels. How Mutual Funds Build Wealth. An individual investor can easily diversify their investment dollars by buying into a mutual fund. Let’s say, for example, you had $3000 to invest. You could buy stock, but $3000 isn’t going to buy much, and it certainly isn’t enough to enable you to build a diverse portfolio. By investing in a mutual fund, you are automatically diversified, which helps you balance your investment risk . Every brokerage firm offers a variety of mutual fund investments to their clients. When the investments owned by the mutual fund pay dividends or interest, profit is passed though to the mutual fund investors. To compound their investment, the investor uses the dividend or interest to buy more shares. PRODUCT PREVIEW
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 205
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