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Personal Finance and Money Management 19 – Investment Return and Inflation Rate, Interest Rate, Market and Business Risk
Aug 19th
As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In this article, we will discuss investment return and inflation.
1. Inflation risk
Inflation means too much money chasing too few goods, and this results in prices for goods and services going up. Inflation may also be expressed as too much money having been printed by the central bank causing too much money compares to the same goods produced.
Sometimes with the economy’s down turn and to avoid the country falling into recession, some governments may overreact with stimulated packages, causing too much money in the market resulting in inflation. Normally, in the inflation period, interest rates to go up, all leading to a vicious spiral.
Inflation is measured by the annual percentage (%) change in the Consumer Price Index (CPI).
In this environment your investment’s real return must be higher than zero, otherwise you are losing money. Real return = rate of return of investment minus inflation rate.
2. Interest rate risk
Investment always carries interest rate risk
a) All long-term bonds are sensitive to ups and downs of the interest rate. When interest rates go up, long term bond prices suffer the most compared to short term bonds, and low rates do the opposite.
b) It is for your own investment’s sake by diversifying holdings and having debt securities with a range of maturities.
c) Common stocks are also influenced by high interest rates, because the high rates discourage business expansion. When the interest rate is down, businesses are likely to borrow for business expansion.
3. Market risk
The supply and demand law governs the marketing risk as follow:
a) When demand increases, supply decreases, thereby increasing the cost of the product.
b) When demand falls, supply increases at first and then it decreases.
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Loading ...Credit Card Consolidation Versus Debt Payment Business
Apr 28th
If you find yourself loaded down by credit card debt that you would love to get rid of then you may have been considering your options. Should you get a loan for credit card consolidation or should you use a debt payment business? Read for credit card consolidation versus debt payment business information.
Credit Card Consolidation
When you use credit card consolidation, you can get a loan to consolidate all of the debt on your numerous credit cards which will allow you to make lower monthly payments that are much less than what a credit card company would make you pay. This allows you to save money month after month.
Another reason that this could be a good option for you is credit card debt consolidation payment means that you won’t be harassed by your creditors as long as you continue to make your monthly payments. Just keep in mind that you will have to cancel all of your credit cards that are included in your repayment plan. You will need to pay fees and interests just like any other loan.
Debt payment business
Also known as credit counseling is another option, especially if you are not in a position to get a loan to consolidate your debt. One big reason that a loan may not work for you is because you do not own something that could be used as collateral like a house. Unlike credit cards, banks will not make a loan without knowing that they can get their money back somehow.
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