Taxable and Tax Deferred Investment Accounts

Taxable Investment Accounts

For taxable accounts, investors must pay taxes on their investment income in the year it was received. Taxable accounts include individual and joint investment accounts, bank accounts and money market mutual funds.

Tax Deferred Investment Accounts

On the other hand, tax-deferred accounts shelter investments from taxes as long as they remain in the account. Any kind of retirement account - 401(k), 403(b), 457, 529, Health Savings Account, IRA or Roth IRA - is a tax-deferred account. If you are self employed, you might consider a SEP IRA, Solo 401(k) or SIMPLE IRA. I will explain about these in more details later in “Different investment vehicles”.

Generally there are three types of tax deferred investments available

1. Employer-sponsored plans

One place to start investing for your retirement is an employer-sponsored plan such as a 401(k), 403(b) or 457. They typically allow both pre-tax contributions and tax-deferred compounding, and many employers offer a matching contribution.

2. Individual Retirement Accounts (IRAs) – Traditional and Roth

Traditional IRAs may allow you to contribute on a pre-tax basis, depending on your income level and some other factors. With a Roth IRA, you can’t make pre-tax contributions, but earnings could potentially be tax-free if certain conditions are met.

3. Annuities

These are contracts between you and life insurance companies that provide death benefits and may also include other guarantees. These benefits may help protect your beneficiaries if you die before the annuity’s proceeds have been distributed. Annuities do have limitations, and guarantees are subject to the claims-paying ability of the issuing insurance company.

Municipal Bonds

Usually municipal bonds are considered tax exempt investment as the interest on municipal bond is exempt from federal income tax and may also be exempt from state and local taxes if you reside in the state where the bond is issued but taxation on municipal bonds has some complications associated with it which I will cover in more details while explaining about the different investment vehicles.

In a taxable account, taxes are assessed each year on realized gains, but the maximum tax rate is 28%. In a deductible IRA, capital gains are tax deferred until withdrawal in retirement, but they are subject to the ordinary income tax rate that tops out at 39.6%. Power of tax deferred accounts  must not be under estimated. The following diagrams can show how it can be a really powerful way maximizing your wealth in long term:

Both types of accounts have their advantages and disadvantages. As a general rule of thumb, tax-efficient investments should be made in the taxable account, and investments that are not tax efficient should be made in a tax-deferred or tax-exempt account.

Ordinary Income, Capital Gains and Qualified Dividends

Before you learn about different types of investment vehicles and how to choose the investment vehicles that can best serve your need, you should be well acquainted with the following three things:

1. What are Ordinary Income and Capital Gains
2. How they are treated differently for tax purpose
3. What are Taxable and Tax Deferred Investment Accounts

Ordinary Income

Ordinary income is usually characterized as income other than (long-term) capital gain. Ordinary income can consist of income from wages, salaries, tips, commissions, bonuses, and other types of compensation from employment, interest, dividends, or net income from a sole proprietorship, partnership or LLC. It is categorized into two different categories- Earned Income and Business Income

Earned Income

Any money derived from a paid work comes under the category of earned income. If you work in a job- look at your pay stub and you will see that there are two types of taxes withheld from earned income (Social Security and Medicare) that are not taken against any other type of income. Self employed persons also pay these two taxes but it is labeled as self employment tax.

People with earned income may be eligible for Earned Income Tax Credit (EIC). IRS publication 596 explains the earned income credit and you can click here to see more details on EIC.

Business Income

Any residual profit (Gross profit - all expenses including your salary) comes under the category of business income. Business income is not subject to the self employment tax and that is where the people who own or are share holders in S corporation save taxes.

Unearned Income

Unearned income is money that you receive without doing “work” for it. Unearned income includes:

• Income from interest
• Dividends
• Capital gains
• Income from retirement account distributions
• Unemployment compensation (but you do pay taxes on unemployment benefits)
• Social Security benefits
• Debt forgiveness
• Money won from gambling
• Some real estate income
• Income from real estate
• Income from trust

Income from partnership or S corporation, without being an active part of the management (that might also be considered as capital gains)

Capital Gains

Long-term capital gains are taxed differently than short-term capital gains and earned income. This means that even if you are in a higher tax bracket, your long-term gains are often taxed at a lower rate (upto 20%). This can be very helpful to you — especially if you have a lot of investment income.


Similarly if a stock is sold within one year of purchase, the gain is short term and is taxed at the higher ordinary income rate. On the other hand, if you hold the stock for more than a year before selling, the gain is long term and is taxed at the lower capital gains rate.


Dividends

The amount of tax you'll pay on dividend income varies depending on the dividend tax rate associated with your overall income and whether or not dividends are ordinary dividends or qualified dividends.

Ordinary Dividends

Ordinary dividends are a share of a company's profits passed on to the shareholders on a periodic basis. Ordinary dividends are taxed as ordinary income and are reported on Line 9a of the Schedule B of the Form 1040. All dividends are considered ordinary unless they are specifically classified as qualified dividends.

Qualified Dividends

Qualified dividends, as defined by the United States Internal Revenue Code, are ordinary dividends that meet specific criteria to be taxed at the lower long-term capital gains tax rate rather than at higher tax rate for an individual's ordinary income.

Below is the table showing the tax rate on qualified dividends and long term capital gains:

Here are three important links I found on off-setting your capital gains in case of capital loss, including what can be off-set and what can not be off-set:

Capital Gains and Losses

Can a Short-Term Capital Loss Be a Tax Write-Off Against Ordinary Gains?

Rules for Capital Losses

Investment Strategies: Rebalancing

Rebalancing is the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state. In addition, if an investor's investment strategy or tolerance for risk has changed, he or she can use rebalancing to readjust the weightings of each security or asset class in the portfolio to fulfill a newly devised asset allocation. It is the process of restoring your portfolio to your target allocation for it.

The rebalancing of investments (or Constant Mix) is the action / trading strategy of bringing a portfolio that has deviated away from one's target asset allocation back into line. This can be implemented by transferring assets, that is, selling investments of an asset class that is overweight and using the money to buy investments in a class that is underweight, but it also applies to adding or removing money from a portfolio, that is, putting new money into an underweight class, or making withdrawals from an overweight class.

 Here are three great article I found- One on FINRA.org about rebalancing your portfolio , another on Investopedia about consequences of imbalance and one on Marketwatch about right way to rebalance your portfolio.

Investment Strategies: Dollar Cost Averaging (DCA)

Dollar-cost averaging (DCA) is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high. DCA reduces the impact of volatility on large purchases of financial assets such as equities. By dividing the total sum to be invested in the market (e.g. $100,000) into equal amounts put into the market at regular intervals (e.g. $1000 over 100 weeks), DCA reduces the risk of incurring a substantial loss resulting from investing the entire "lump sum" just before a fall in the market. Dollar cost averaging is not always the most profitable way to invest a large sum, but it minimizes downside risk.


In essence, the technique works in markets undergoing temporary declines because it exposes only part of the total sum to the decline. The technique is so-called because of its potential for reducing the average cost of shares bought. As the amount of shares that can be bought for a fixed amount of money varies inversely with their price, DCA effectively leads to more shares being purchased when their price is low and fewer when they are expensive. As a result, DCA can lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time.

Here are two different examples of dollar-cost-averaging that will help you understand it better:

 

 

Here are three different web links, if you want some deeper details on - what is dollar cost averaging, why dollar cost averaging is a smart strategy and why dollar cost averaging works well with mutual funds.

Difference between Asset Allocation and Diversification

Asset Allocation refers to investing in different categories of investments, called asset classes. That is, we pick which assets we want to have in our portfolio. Generally, investors choose from stocks (equities), bonds (fixed income), cash, commodities and real estate.

Diversification, on the other hand, is the process of balancing these classes – and within these classes – so they offset one another amid ever-changing market conditions.

(Source: Stockcharts.com)

Your asset allocation may represent a diversified portfolio or a concentrated portfolio, if you are only using a couple of specific asset classes, then it is probably a concentrated portfolio. The goal of portfolio diversification is to generate the highest possible return for a given level of risk. A portfolio of all small company stocks may result in greater returns than a diversified portfolio of stocks, but it is unlikely to achieve that result without significantly more risk or volatility.

Asset allocation is a key element of diversification. No asset class is the top performer each year, so selecting asset classes that are not well correlated or do not move in the same direction, makes sense.

Here is an example of a portfolio with asset allocation and diversification:

You may also want to read this article on stockcharts.com for a better understanding of the difference between Asset Allocation and Diversification.

Here is another detailed article- Beginners' Guide to Asset Allocation, Diversification, and Rebalancing I found on SEC's website.

Investment Strategies: Diversification

Diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.

The goal of diversification is not necessarily to boost performance—it won’t ensure gains or guarantee against losses. But once you choose to target a level of risk based on your goals, time horizon, and tolerance for volatility, diversification may provide the potential to improve returns for that level of risk.

To build a diversified portfolio, you should look for assets—stocks, bonds, cash, or others—whose returns haven’t historically moved in the same direction, and to the same degree, and, ideally, assets whose returns typically move in opposite directions. This way, even if a portion of your portfolio is declining, the rest of your portfolio, hopefully, is growing. Thus, you can potentially offset some of the impact of a poorly performing asset class on your overall portfolio.

Within your individual stock holdings, beware of over-concentration in a single stock. For example, you may not want one stock to make up more than 5% of your stock portfolio. It would be smart to diversify across stocks by market capitalization (small, mid, and large caps), sectors, and geography.

Investment Strategies: Asset Allocation

Asset Allocation

Asset allocation is about not putting all your eggs in one basket. It's the ultimate protection should things go wrong in one investment class or sector, as is likely to be the case from time to time.

Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. Asset allocation is based on the principle that different assets perform differently in different market and economic conditions. Asset allocation is both the process of dividing an investment portfolio among different asset categories, as the resulting division over stocks, bonds, and cash. This process of determining which mix of assets to hold in a portfolio is a personal one. The asset allocation that works best at any given stage in an investor's life will depend largely on the need, ability and willingness of the investor to take risk. These depend on the investment time horizon and on both the investor's financial capacity and emotional capacity to tolerate risk and to stay the course.

A key reason for devising an asset allocation strategy is to help reduce the risk inherent in volatile equity asset classes that are expected to provide higher returns by combining these asset classes with more stable fixed-income assets. These balanced portfolios help reduce volatility and down-side risk, thus better enabling an investor to maintain investments over a long term period.

There is a nice article I found on the the website of American Association of Individual Investors about asset allocation. You MUST read this article to get some more detailed understanding on asset allocation. Click on this link to read this article.

You can also use this Asset Allocation Calculator on Bankrate.com website to determine how you should diversify your portfolio to allocate your assets.

Factors to consider before investing

Before you invest your hard earned money in a particular investment vehicle, it is of paramount significance for you to know:

• What do your finances look like right now
• What is the goal of your investment- short term income, medium term growth or long term wealth
• What is the investment time frame you are looking at- short term, medium term or long term
• Know more details of your Investment Vehicle- Do not invest in anything you do not understand
• Minimum and Maximum amount limits of your investment
• If your Investment is portable to other vehicles without any penalty
• What is the ROI as compare to other investment vehicles
• How liquid your investment is in that particular account
• What is the level of risk involved
• Tax implications on your investments and returns
• Is it the only good investment option for you

 The mistake of making a wrong choice can not only offset the profits of your investment but also defeats the whole purpose of investing. Do your due diligence before investing and always remember past results of any investment do not guarantee its future performance.

Here is a link from SEC to learn about the 10 things to consider before you make investing decision.

Adjusted Gross Income (AGI) is the key word

While preparing your tax return, you probably spend more time on your "taxable income" without paying any attention whatsoever on your adjusted gross income (AGI). However, your Adjusted Gross Income (AGI) directly impacts the deductions and credits you’re eligible for—which can wind up reducing the amount of taxable income you report on the return.

Adjusted gross income (AGI) is an individual's total gross income minus specific deductions. Taxable income is adjusted gross income minus allowances for personal exemptions and itemized deductions. For most individual tax purposes, AGI is more relevant than gross income.

Your AGI is equal to the total income you report that’s subject to income tax such as earnings from your job, self-employment, alimony income and interest from a bank account minus specific deductions, or “adjustments” that you’re eligible to take. Your AGI is calculated before you take exemptions and the standard or itemized deduction—which you report in later sections of the return.

You can find AGI in the forms 1040, 1040A, 1040EZ or 1040NR.

Click here for more information on AGI and click here to learn more about the AGI implications on taxes.

Tax Brackets and Social Security Benefits

Worried About Your Retirement? Well! You should be. Specially if you are fourty something and still have no clear plans for your retirement. Social security benefits alone are not going to be helpful at all. The maximum social security benefit depends on the age you retire. For example, if you retire at full retirement age in 2016, your maximum benefit would be $2,639. However, if you retire at age 62 in 2016, your maximum benefit would be $2,102. If you retire at age 70 in 2016, your maximum benefit would be $3,576.

Merely putting money in your saving accounts does not help either. The interest rate on you money in saving accounts probably does not even beat the rate of inflation. an that's why you MUST invest your money in some place where it can grow itself at a rate where the residual amount should be decent enough for your retirement, even after paying taxes and beating the inflation.

Every year, the IRS adjusts more than 40 tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation, instead of any increase in real income. IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly. Rather than directly adjusting last year’s values for annual inflation, each provision is adjusted from a specified base year.

Click here for more information on tax brackets.

Characteristics of the Market

The words like “Stock market crashed”, “Government bailout”, “End of American capitalism”, “Major Banks Collapse” and “Trillions of dollars wiped off” will always linger in the minds of people who have lived through the 2008 stock market crash and lost most of their money. In the biggest single intraday point loss ever, Dow Jones fell nearly 778 points after $700 million government bailout plan was rejected by the house.

 

In spite of having the world class intelligence and state-of-art technology, it is not uncommon for experts to miss the blind spots and make mistakes. Market has always been and will always be unpredictable so before you even think about any market based investment, it is imperative to understand that market changes every moment. It has certain characteristics and it is highly impossible to predict the behavior of the market. Several events such as- Income statements, Balance sheets, Earning reports, News, Economic reports, Federal announcements, Terrorist attacks, Analysts’ opinion and recommendations and Technical indicators may have a severe impact on the market’s behavior. Old trends and patterns do not determine the future direction of the market. Here are some of the important factors that you need to consider while you try to determine the future behavior of the market:

Volatility

Stock markets are volatile. Price changes of several percentage points within a short period are common. Markets usually react to news events, such as corporate earnings, government economic reports and geopolitical events. Software algorithms and automated trading strategies, along with the increased participation of investors, have increased the complexity and volatility of stock markets. You can hedge against market volatility by diversifying your portfolio. Successful investors ignore short-term fluctuations because stock prices reflect the underlying fundamentals over time.

Selection

Markets offer a wide selection of stocks to suit different risk tolerances and financial objectives. Aggressive investors can buy the stocks of newly listed companies and growth companies. Although these stocks are riskier than the stocks of established companies, you could benefit from significant price appreciation. Conservative investors could buy dividend-paying stocks, which generate regular income and some potential for price appreciation. You can find stocks from major industry sectors and sub-sectors within each industry. For example, you could invest in microprocessor and software companies within the technology industry and in department stores and specialty retailers within the retail industry.

Liquidity

Stock markets provide liquidity because they bring together investors and businesses from all over the world. Liquidity results in narrow bid-ask spreads, which means small differences between what buyers are offering and what sellers are asking for stocks. The result is order fills at favorable prices. Information technology plays a role by increasing the speed at which the markets execute trades and disseminate information to investors and other market participants. The free and transparent trading that takes place in the stock market prices is according to demand and supply, bid and ask. In this way it provides liquidity for investors seeking to transact sales of their holdings through this active pricing mechanism.

Global

North American and other stock markets are interconnected and interdependent. For example, Asian and European companies list on North American exchanges, while U.S. and Canadian companies list on European and Asian exchanges. Individual and institutional investors can trade stocks using 24-hour electronic communications networks. A stock market drop in Tokyo overnight can spread to Frankfurt in the early morning hours and hit New York in time for the opening bell. Similarly, news events in Europe can ripple through global stock markets in minutes.

Regulated

Regulations are necessary for fair and efficient markets. The U.S. Securities and Exchange Commission regulates the U.S. securities industry, along with the New York Stock Exchange and other markets. Securities laws ensure that investors and other market participants have access to the necessary information in a timely manner. The stock market provides a degree of protection to investors through oversight by the SEC, FINRA and other legal regulatory and self-regulating bodies on state and professional levels that serve to create an organized and liquid group of stock exchanges and stock trading platforms.

Gains and Losses

You are not guaranteed to make money when you invest in the stock market. But unlike with savings accounts, certificates of deposit or similar investments with fixed-rate returns, there is no limit on the money you can make in the stock market either. If you sell stock for more than you paid, you record a gain. Sell it for less than you paid and you incur a loss. Either could have tax ramifications.

Diversification

Just as there is safety in numbers, there is security in diversity. Investing in more than one company's stock could protect you. Should the price of one company's stock plummet, gains in others might minimize your overall loss or perhaps even increase your total return. Mutual funds are popular among investors because they allow you to spread your investment among shares of several companies. You also can diversify by yourself by directly buying shares in different companies.

Stock Categories

Mutual funds and investors often focus on stocks with similar characteristics. Income stocks pay large dividends, but their prices do not rise much, according to the New York Stock Exchange’s Learning Center. Established companies with smaller dividends but steady prices are considered blue-chip stocks. Growth stocks belong to young companies that pay little or no dividends but offer greater chances for long-term price increases – or decreases. The prices of cyclical stocks, like those of home builders and automobile manufacturers, fluctuate with economic expansions and slowdowns. Conversely, defensive stocks, such as those of food and beverage manufacturers, maintain their values during recessions.

Indicators

Number of shares traded, closing prices, the change from their previous prices and the 52-week highs and lows are among the more rudimentary measures of a stock’s performance. Price-to-earnings ratio also is a standard. If, for example, a share sells for $50 and the company earned $5 a share, then the P/E ratio is 10. Investors might buy if they feel the ratio is low and that the price might rise. Or they might sell if they expect the price to soon drop because they consider the ratio to be too high.

Bulls and Bears

Do you see the proverbial glass of milk as half-full or half-empty? Your answer would indicate if you were a bull or a bear. Bears expect the stock market to drop while bulls bet that it will rise. Similarly, when prices generally decline over a prolonged period of time, it is considered to be a bear market. Sustained increases are called bull markets. You might buy or sell stock based upon whether you expect the market to rise or fall.

Booms and Busts

Easy come and easy go. Investors occasionally push prices of hot stocks or industries, or even the market as a whole, to unsustainable highs. The inevitable bust then follows. For example, stock prices soared for companies that capitalized on the adoption of the Internet in the late 1990s. University of Maryland researchers found that investors poured $880 billion into the telecommunications industry from 1997 to 2002, only to see half of it dissipate within the next five years.

Growth Capital

Issuing of stock is the cornerstone of capital formation for enterprise in capitalist economic systems. The stock market provides a way for companies to issue stock to the investing public.

Transparency

The public nature of trading maintains transparency in financial transactions. Efficiency, growth, freedom and variety are all possible because of transparency that allows all participants to access the bid and ask prices of all securities traded on the market and because all participants have access to the same information.

Economic Indicator

One of the ten components of the Leading Economic Indicators is made up of the Standard & Poor's 500 Stock Index, one of the major stock market indexes. The direction of trading activity in the stock market provides an indication of the state of commerce and overall confidence in the economy.

Regulated Risk/Reward

An organized and regulated stock market serves as a way for investors who seek large returns on their investments to access organized, liquid, regulated and transparent risk investing.

(Reference: http://www.zacks.com)

Investment, Asset Classes and Financial Markets

When you talk to someone about “investing”, two words that you will come across frequently are “Investment” and “Market”. So what is an investment and what’s a market?

What is an Investment
People have been confusing the word investment with a lot of things which have nothing to do with investment. Now a days you see people “investing” in their big houses, cars, TVs, education and the word investing is replacing so many other words just to justify an “investment”.

Investment means “a purchase” which is supposed to generate a profit or an income. In broad category, we can categorize investment into three categories:

1. Ownership e.g. Business, Real Estate, Stocks, Precious metals (like gold, silver)
2. Lending e.g Peer-to-peer lending, Bonds, Certificate of deposits (CDs), Treasury inflation protected securities (TIPS)
3. Cash Equivalent e.g savings account, money market funds

But investment companies categorize it into four groups known as Asset Classes - 

1. Equity e.g Stocks, 
2. Fixed Income e.g. Bonds 
3. Cash Equivalent e.g. Money Market Instruments such as Treasury bills, Certificates of deposit, Bills of exchange, Asset backed securities and Repurchase agreements
4. Alternative Investments e.g Real Estate, Commodities, Derivatives, Hedge Funds, Index Funds, Funds of Funds, Mutual Funds, Exchange Traded Funds (ETFs), Private Equity, Venture Capital, Options, Futures, Forex, Annuities

So basically an asset class is a group of financial assets / securities that are behaviorally and characteristically similar and are subject to the same laws and regulations.

Investopedia defines security as “A security is a financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer”.

Here I am just giving you an overview of everything and later we will get into the details of each of these to see what exactly they are.

What is a Market
The yield of every investment depends on how the “market” is doing. When you invest your money with investment companies, they further invest that money in the market through various investment vehicles to generate profits. These investment vehicles may have different level of risk associated with them. High risk investment vehicles such as stocks, options and futures usually yield high returns and low risk investment vehicles such as CDs and Bonds yield comparatively low returns.

Market, also called financial market, is a place where these securities are traded i.e. Where they are bought and sold. The funniest fact of the market is there are two sides (buyer and seller) of this trade and both sides expect to make profit with their respective transactions.

Financial market is further categorized as- Capital Market and Money Market.

Capital Market
Capital market primarily provides a platform for trading of securities in order to raise long term funds for corporations, government, banks or any other issuing group. Let’s take a look how it works-

First time when a company seeks to raise funds through public investments in its shares it goes through investment banks and underwriters to issue the shares, distributes prospectus, and conducts road show (marketing). Investment banks advise the company about the best way to raise funds, pricing financial instruments and how to meet the regulatory requirements. Investment banks have to outbid other institutions who also want to handle the transaction on behalf of the issuer but if the market demand for the securities is weaker than expected, investment ban may not be able to make a nice spread (spread is the profit margin) or may even end up in loss.

Underwriter is the company that works with the issuing company to determine the “right price” of the security offerings and manages the issuance and distribution of securities, buys securities at a predetermined price from the issuer and re-sells them to the public through its distribution network at an exchange. Underwriter received underwriting fee and makes some profit in the re-selling the stocks to public that is also called initial public offering (IPO).

In the above scenario, investment bank operates in Primary Market while initial public offering is made in the Secondary Market, if the company meets the conditions of Size, Liquidity and Ownership (public float) . Stock exchanges are characterized by a summary index called stock index or stock market index which is typically computed as a weighted average price of the selected stocks being traded in that exchange. NASDAQ composite, Dow Jones Industrial Average, and S&P500 are he examples of stock indices.

An exchange can be used by the companies to seek new capital, additional equity capital for expansion or new projects, buy back shares if funds can not be invested more productively and take over or merger with other companies.

Just like corporations need money to expand into new markets, governments also need funds for things like building new infrastructure and improvement of old infrastructure but governments do not issue stocks (remember stocks are the ownership equities) . Governments issue various bonds to borrow money from the public for a certain time.

Depending on the type of security being traded, capital market is further categorized into:

1. Equity Market
2. Debt Market
3. Derivatives Market
4. Commodity Market
5. Forex Market (also currency market)

Money Market
Money market is used to raise short term funds, usually for one year or less. From the investors’ point of view money market is a good place to “park” funds. Money market ensures corporations and governments maintain adequate level of liquidity on daily basis. Companies may even borrow short term funds from the money market for things like running payrolls.

Money market instruments include Treasury Notes, Bank Accepted Bills, Commercial Papers, Certificates of Deposit.

But remember regardless of the term (long term or the short term) and the type of market (capital market or money market), all types of investments have some inherent risks involved. No investment is safe and even money market investments may also experience negative returns.

Welcome to Wall Street Investing: The Smart Investing Blog

"Wall Street”! Doesn’t that word ring a bell and reminds you of filthy rich investors who sit in luxurious offices, own expensive estates and fly in private jets, the people who know how to make money regardless of the direction of economic swing.

Internet is full of websites, videos, articles and blogs about how to be rich buying and selling stocks, investing in real estate etc. but it all may not be as easy as it sounds. You must be properly educated and well informed about investing, various investment vehicles, investment strategies, level of risk associated with each type of investment vehicle before you actually start investing money and above all you must be aware of what you are getting yourself into. Is it really meant for you? And that’s what the purpose of this blog is- Education and Information.

If you are someone who has enough money to gamble with in stock market or an investor playing with house money or even if you are someone who wants to learn not just about investing but about smart investing- Welcome to Wall Street Investing: The Smart Investing Blog.

I won't promise you that my blog will turn you into a professional investor who can invest like a wall street pro but it may surely help you learn the basics and hit the ground running.

Disclaimer

Do not act based on anything you might read on this blog. The content of this blog is purely for informational purposes only. The information on this blog should not be construed as a recommendation, suggestion, advise or offer to buy or sell any securities, make any real estate related investments, suitability of any investment strategy to any reader and does not encourage anyone to take any position in any market.

All the information, data, research reports or insights have been either derived or obtained from various sources or may be the independent opinion of the writer and writer does not guarantee the accuracy of any information, data, research reports, insights provided on this blog. Writer of this blog does not bear any responsibility for any tangible, intangible or punitive damages arising due to any such information or content provided on this blog.