Journal (1-2) - Grade: A PDF

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Mutual Funds, ETF...

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Journal 1-2 ETF and Mutual Funds Southern New Hampshire University November 1st, 2020

I.

Short term investments are investments that are temporary and typically mature within one year and usually carry little to no risk to the investor. Money Market Mutual Funds are considered a type of short-term investment. These investments are considered extremely low risk and are the closest investment an investor could get to a no risk or being risk free (Baldridge, 2020). United States Treasury Bills are a type of Money Market Mutual Fund short-term investment. Treasury Bills are backed by the US Treasury Department usually in denominations of $1,000.00, and mature within one year or less.

II.

Stocks are considered equity investments because the stocks are allowing the investor to have ownership into the company. Common Stockholders represent a piece of ownership in the invested company and are given rights to vote on board of directors for the company. However common stockholders are the last to receive their assets if a company were to go bankrupt, as creditors, bondholders and preferred stockholders receive their assets first. This leaves the common shareholder at a higher risk of not receiving assets (Chen, 2020). Preferred Stockholders are in a better position risk wise than a common stockholder, as it is also having features of debt and it pays a fixed dividend amount or a preset calculation for dividends. However, the preferred holder usually does not have the ability to vote (Ganti, 2020).

III.

Fixed income investments are investment that have a cash return that is periodic and are set at a fixed amount or a fixed formula used for receiving returns based on performance. As well, fixed income investments may have a contract stating a guaranteed return or the

company could be sued. Bonds are a type of fixed income investment, it represents a loan made from the investor into the company, and it is recognized as a debt for the company. Bond terms usually have a variable or fixed interest rate included to be paid by the company or be the company could be in risk of default and be open to being sued (Hayes, 2020). IV.

ETFs are traded like common stock, throughout the day and they are listed on the exchange, they incorporate a collection of securities like a mutual fund. There are less associated broker fees when selling or purchasing unlike common stock (Chen, 2020).

V.

Mutual Funds are made up of many different securities and allow their investor to have a diversified portfolio. This allows for it is investors to take less of a risk than purchasing a single share of stock in a company, because if one of the companies in the fund fail, it is only a portion of the full investment (Hayes, 2020).

References: Smart, S. B., Gitman, L. J., & Joehnk, M. D. (2017). Fundamentals of investing (13th ed.). Boston: Pearson Education. Hayes, A. (2020, August 28). Mutual Fund Definition. Retrieved November 01, 2020, from https://www.investopedia.com/terms/m/mutualfund.asp Hayes, A. (2020, September 16). Bond. Retrieved November 01, 2020, from https://www.investopedia.com/terms/b/bond.asp Chen, J. (2020, September 28). Exchange Traded Fund – ETFs. Retrieved November 01, 2020, from https://www.investopedia.com/terms/e/etf.asp Ganti, A. (2020, September 16). Preferred Stock. Retrieved November 01, 2020, from https://www.investopedia.com/terms/p/preferredstock.asp Chen, J. (2020, August 29). Common Stock. Retrieved November 01, 2020, from https://www.investopedia.com/terms/c/commonstock.asp Chen, J. (2020, September 16). Treasury Bills (T-Bills). Retrieved November 01, 2020, from https://www.investopedia.com/terms/t/treasurybill.asp Baldridge, R. (2020, August 28). Introduction To Money Market Mutual Funds. Retrieved November 01, 2020, from https://www.investopedia.com/investing/introduction-to-moneymarket-mutual-funds/...