Financial Market

Financial Market



Financial Market

Introduction

An individual's savings needs to be put somewhere, and while there are many different options, some financially make more sense than others. One avenue of investment that offers some of the best possible results would be the United States Financial Markets. The U.S. markets offer not only an efficient way of allocating an individual's savings, but they provide one of the best avenues for a successful rate of return, and when invested wisely, offer a very secure future, especially when factoring in the expected rate of return.

Before we even discuss the possible types of investment an individual could explore, we need to know exactly what type of investor we are discussing. For our purposes there are basically two types of investors, the first being the short-term investor who is looking to get as large a return on his investment as he can in the shortest period of time possible. This is an investor who is willing to take additional risk and is most likely not investing his entire savings. Usually these investors are younger, and looking to use the proceeds for large purchases, such as a home, in the relatively near future. Returns above and beyond those needs will probably be continually reinvested in different instruments depending upon short-term goals and needs and the current economic atmosphere.

The second type of investor is the person looking long-range. They have probably already purchased a home and are looking to securing the future for their family. Their main concern is not in generating wealth, but in providing for financial security for their retirement years. They want to minimize risk since they probably do not have the time to rebuild their investment portfolio and while they would like the best rate of return possible, they are looking at that return over a 20 or more year period, rather than in the immediate or near future. For the purposes of this paper, this is the individual savings investor that we are discussing.

The second important aspect is to identify some of the various instruments an individual could use in invest sting his savings. The obvious first option for savings is a basic savings account. While easy to set-up and secure against loss due to outside economic events, the rate of return is very small, currently as low as 1.2% in some institutions, and it's easy access by the investor means that there is a better chance of the investor removing funds from this account. While a good short-term holding instrument for funds, as an investment opportunity it provides very little.

Of course, it must be pointed out that even though we are discussing U.S. markets, those markets are not isolated from world events, and even though an investor might be putting his resources in one or two particular companies, those companies are effected by other companies in and out of the U.S. and by economic trends throughout the world. Since the late 1980s, all stock markets have come under increasing pressure to make ...