How to Calculate Interest Rate with Deposits and Withdrawls

People tend to do many different things when it comes to investing. Some people will set a certain amount aside and once they have "arrived", they will let that money sit in a savings account. This is likened to buying some tools and just letting them rust in the shed.

Other people, will accumulate a nice savings and then invest it, hoping that this investment will produce good fortune. This is likened to purchasing a small plant that was nurtured since it was a baby seed, then taking that plant and searching for a location to plant it into the ground, then sitting back crossing your fingers and hoping it will grow.

Finally, other people, will steadily grow their savings, never "arriving" but out of sheer habit, setting aside a specified percentage of their income and continuing to invest over time. This is likened to planting an orchard. It is not surprising that the orchard planters are the successful ones, and rare at that.

If you are an orchard planter, how do you calculate your interest rate. You will need to know the deposits/withdrawls made along with the dates. In addition, you will need to know the current net worth and current date.

• On 04/02/2013, a man spent $300 purchasing stock.
• On 05/03/2013, a man spent $300 purchasing stock.
• On 09/03/2013, a man spent $300 purchasing stock.
• On 10/01/2013, a man spent $300 purchasing stock.
• On 11/01/2013, a man spent $300 purchasing stock.
• On 12/01/2013, a man spent $300 purchasing stock.
• On 01/02/2014, a man spent $250 purchasing stock.
• On 02/04/2014, a man spent $250 purchasing stock.
• On 03/04/2014, a man spent $250 purchasing stock.
• On 04/02/2014, a man spent $300 purchasing stock.
• On 05/02/2014, a man spent $300 purchasing stock.
• Today, 05/30/2014, the man's stock is worth 3170.14.

When it comes to listing deposits, you should include money used before sales charges as positive numbers. When it comes to listing withdrawls, you should include money withdrawn after sales charges as negative numbers. You should also include money used to pay taxes as a negative number. This will give your own personal interest rate (and profit) as opposed to the investment's reported interest rate.

To calculate the interest rate, r, you must solve the equation:

P1(1+r)^Y1 + P2(1+r)^Y2 + ... + PN(1+r)^YN = PF

From our example above, P1 is the $300 and Y1 is the number of years between 04/02/2013 and 05/30/2014. PF is 3170.14. This can be solved using a binary algorithm. See sizustech.blogspot.com for a Java example.

Solving this equation gives an interest rate of 1.17%.

This post was reposted from http://finlit.biz/retirement-2/how-to-calculate-interest-rate-with-deposits-and-withdrawls/, originally written on May 30th, 2014.

Index Funds versus Individual Stocks

Here are some miscellaneous tips on index funds and individual stocks.

The reason for the passive index fund is that it has multiple stocks to spread the risk. This is called diversification. Like in a garden, multiple seeds, spread out into different companies. Index means a specific group of selected companies which are used to represent the market they are in. Passive means that there are low maintenance fees. The average investor pays about 3.75% in fees per year.

Its a good idea to look at mathematical ways to purchase stocks at a cheaper price. This includes dollar cost averaging and rebalancing.

There are two 10% rules, that may apply, one for index funds and the other for individual stocks. Never invest more than 10% in individual stocks. If you do, it is very much a gamble. Ten percent, here, refers should include all of your assets, not just your stock portfolio.

When the index fund rises or falls 10%, look into rebalancing. This means, if the target allocation is $20,000, and the price jumps 10% to $22,000, sell $2,000 to take the profit. However, keep an eye out for fees required during a sale. With large amounts invested, companies should allow you to make free trades, to minimize these fees.

This post was reposted from http://finlit.biz/retirement-2/index-funds-versus-individual-stocks/, originally written on April 30th, 2014.

What is inflation risk?

The question we will ask today is whether or not holding $100,000 in your checking or savings account is risky.

Do you remember what it cost to purchase an ice cream cone when you were a kid? For me, it has almost quadrupled in price. Isn't that amazing? Let's take a look at how this type of thing happens, this thing called inflation risk.

Well, in 2007, the monetary base for the United States was about 1 trillion dollars and this monetary base has quadrupled to 4 trillion today. According to www.huffingtonpost.com, "the monetary base (currency, coin and bank reserves) rose from $800 billion in August 2008 to $1.9 trillion in November 1, 2010 (2.3 times larger)." As of Dec 2013, according to www.bloomberg.com, "Chairman Ben S. Bernanke has raised assets from $2.82 trillion before the third round of quantitative easing began in September 2012 and quadrupled them since 2008 to attack unemployment after the 2008-2009 recession."

While different economists have different explanations, my belief is that our dollar will soon be worth one quarter of what it is worth today. According to history, inflation rate in the US has been 3.22% since 1913, according to inflationdata.com.

So, keeping your money in your checking account will lose roughly 3.22% per year.

This post was reposted from http://finlit.biz/retirement-2/what-is-inflation-risk/, originally written on March 30th, 2014.

A Common Mistake When Entering a New Job

Did you know that most people don't take full advantage of their 401k match at work? This little tip could help increase your net worth by thousands of dollars over the next decade.

Most people make the common mistake of automatically joining the 401k offered by their work. They may have a variety of reasons, including consolidating their retirement funds. Did you know that most 401k plans have hidden fees, called operating expenses?

In general 401k plans, have higher expenses than a typical personal IRA would have. For this reason, the major reason to actually contribute to your work's 401k plan would be if they offered a match.

It is common for an employer to offer a 4% match, meaning that if you contribute 4% of your salary towards your 401k, your employer will match that 4%. Now here's the kicker. If your employer matches 4%, you often need to contribute more than 4% in order to take full advantage of the free money they are offering.

Here's why. Suppose you earn $60,000 per year and you start contributing 4% towards your 401k, due to your employer match. Well, if you earn a $5,000 starting bonus and another $2,000 end of the year bonus, you will miss out on $200 because you didn't factor in the additional $7,000 in compensation ($7,000 * .04 = $200).

Over time, and over jobs, these little details can add up to thousands of dollars.

This post was reposted from http://finlit.biz/retirement-2/a-common-mistake-when-entering-a-new-job/, originally written on January 12th, 2013.

Why the Wealthy Tithe

This next concept is so important.  In fact, it is so important it is reiterated in the bible twice:

"Whoever has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him" - Matthew 13:12

"Whoever has will be given more; whoever does not have, even what he has will be taken from him." - Mark 4:25

It is amazing how this works.  When you give away the first ten percent of what you make, you are essentially saying two things:  The first is that you know the source of your belongings and are grateful.  The second is that you believe you already have an abundance and are blessed enough that you can give ten percent.

If you cannot tithe when you are poor, there is no way you will tithe when you are wealthy, because the checks just get bigger.  If you study the wealthy, you will find the following principle.  While most people say they cannot tithe because they are not wealthy, the truth is that they will not become wealthy until they tithe.

This post was reposted from http://finlit.biz/retirement-2/why-the-wealthy-tithe/, originally written on November 7th, 2013.

Improving Your Finances While Maintaining Your Lifestyle

Have you ever gotten a raise? What about an unexpected bonus? A refund check from the IRS? Found a surplus in your checking account?

Many people have financial challenges and today, I am going to talk about one very big tip that will help improve your financial situation for years to come.

Did you know that many people making six figures but are in debt and not on track for retirement? Yet, they can survive and pay their month to month expenses. Did you know that there are also people who are surviving and paying their month to month expenses, making half of what the six figure salary earners are making? And still, there are people living off of half of that.

How does this happen? Isn't it true that when our income rises, our expenses tend to grow to match the level of income? Today, I'm here to teach you how to stop the madness.

When you get a raise, be purposeful about how you are going to spend the raise. Since you were already living just fine without the raise, take 80% of the raise and implement a pay yourself first program. This means, that you apply this money towards your debt elimination program or your retirement savings, before you use it for monthly expenses. After you have done this, you can take the other 20% and spend it however you like. Go ahead, you deserve it for your hard work.

Remember, by choosing to keep the same standard of living, you are also choosing to improve your finances.

This post was reposted from http://finlit.biz/retirement-2/improving-your-finances-while-maintaining-your-lifestyle/, originally written on September 12th, 2013.

How Do You Include Residual Income in Your Net Worth?

Suppose you make a deal that earns you $15/month.  Most people would not be very impressed, would they?  However, today, we will discuss how important this little $15/month is.

While many people try to hit home runs and make big deals, I encourage you to learn how to repeatedly hit singles and the home runs will come.  If you can add a little $15/month brick as an asset onto your personal balance sheet, you can do it over and over and over again.

The formula is as follows:

Asset Worth = Monthly Payout * 12 / Interest Rate

Let's use an example.  The $15/month brick has a monthly payout of $15 and the standard interest rate people use is .05 (or 5%).  This means that as an asset, the $15/month brick is worth $3,600.  The monthly payout of a residual income stream is 240 times as valuable.  Why is this?

Well, if I have $3,600 in an investment with a 5% rate of return, I will get $180 per year.  This equates to $15/month.  Was this an eye opener for you as far as understanding the worth of residual income?  Are you steadily working to plant seeds, build a pipeline or dig a well which payout for years to come?  How?

"The plans of the diligent lead surely to plenty, but those of everyone who is hasty, surely to poverty." Proverbs 21:5

This post was reposted from http://finlit.biz/retirement-2/how-do-you-include-residual-income-in-your-net-worth/, originally written on March 12th, 2013.

How Do You Rebalance a Stock Portfolio?

Suppose you have a portfolio breakdown as follows:  10% cash, 40% real estate, 15% mutual funds, 30% bonds and 5% individual stocks.

Imagine that your individual stocks increase in value to the point that your portfolio allocation now changes?  How do you make sure the portfolio remains balanced?

First of all, you will notice that only 5% of the portfolio is placed in the riskier investment of an individual stock.  The other 95% allows for growth but is highly concerned with principal protection.  Limiting your riskier investments to less than 10% of your portfolio allows for potential growth with minimal risk.

Verizon stock, which lies in the 5%, just went up to $45.78/share about 10% up from a few months ago at $41.202/share.  At a macro level, this puts the portfolio allocation in individual stocks slightly higher than desired.  This means, that some of this stock should be sold to reset the asset allocation.

At a micro level, we want to implement a strategy so that we make money in an upward market, sideways market and downward market (see sizusfinlit.blogspot.com).  Since we believe in the company, this means that we rebalance that position, selling off some of the gain this year.  While most people are looking to make a homerun, we are looking to hit singles.

So both at a macro level for asset allocation and micro level to have a money making position, we sell off a very specific percentage of the position.  There are no sales fees to do this since the position is large enough.  Also, we will set a market alert for $50.358/share and $41.202/share to monitor this position.

Do you rebalance?  Do you have a macro and micro strategy?  Is your strategy affected by emotion?  Do you do what everyone else is doing?

This post was reposted from http://finlit.biz/retirement-2/how-do-you-rebalance-a-stock-portfolio/, originally written on February 25th, 2013.

What is a Bond?

When you purchase stock, you purchase a piece of the company.  For the potential of growth, you take on some of the risk, of the company not being profitable.

When you purchase bonds, you purchase a piece of the company's debt.  For the potential of fixed income, you take on some of the risk, of the company going bankrupt.

A deeper explanation may be found at en.wikipedia.org.  Typically, a good mixture of stocks and bonds is advised.  See how your portfolio compares at online.wsj.com.

Personally, I like the idea of holding 40% in stocks and 60% in bonds as mentioned in Can You Develop a Portfolio With Little Experience?.  It all depends on your personal risk tolerance and the risk associated with bonds as discussed in 10 Investments Ranked From Least Risky to Most Risky. An explanation for why bonds tend to be less risky can be understood by reading 5 Obligations for a General Public Company.

Happy reading! Please come back soon to see why we focus on purchasing assets rather than the rate of return.

This post was reposted from http://finlit.biz/retirement-2/what-is-a-bond/, originally written on February 24th, 2013.

25 Reasons Financial Literacy is Important

Have you ever wondered why someone might change careers all of a sudden?  Have you ever seen someone do something and you thought it would be great if you had the talent to do something like that?  Do you feel that your talents are being utilized to the best of your ability?

Today, we will explore the importance of financial literacy.  Perhaps, you will feel an area that you can relate to and possibly have the desire to jump in and make a career change or pitch in enough to make a difference.  Here are 25 reasons why you might help promote financial literacy in your community:

1. The number one related cause of health issues is stress, often caused by finances.
2. Divorces occur in today's society at an extremely high rate, most often due to financial struggles.
3. People are thousands of dollars in debt which affects their health and relationships.
4. Students are accumulating large amounts of debt before graduating college.
5. Young couples and families are starting their lives together in debt bondage.
6. People are suffering in the shackles of debt, lost without a plan.
7. People are losing their homes, with foreclosures happening on every street corner in the US.
8. Middle class families continue to be left out in the cold.
9. People do not have enough money saved for retirement.
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10. People are losing their hard earned retirement money on real estate investments.
11. The banks and brokerages continue to grow as families continue to suffer.
12. People are gambling away thousands of dollars on stock investments.
13. People are allowed to invest with the click of a button and without a solid investment strategy.
14. Families haven't spent enough time thinking about their future and communicating their goals.
15. The middle class is being taxed to death and slowly shrinking.
16. Loop holes in the system allow people making double the salary to have one third the taxes.
17. People are being ripped off left and right by unethical business contracts.
18. People are typically overinsured or underinsured when it comes to life insurance.
19. Despite lawsuits and years of lobbying, predatory practices continue to be affluent in our society.
20. Families and siblings are left to fight and clean up the mess after their parents pass away.
21. Without adequate estate planning, children are at risk to become lost in the system.
22. Small businesses continue to fail at alarming rates.
23. Business schools continue to be taught by amateurs rather than successful leaders.
24. The lack of mentorship for young people and people in mentorship programs is dwindling.
25. The ability of our communities to negotiate deals fundamentally affects our global economies.

Thank you for visiting!  Remember to spread the word through social media sites such as facebook, twitter and linked in!

This post was reposted from http://finlit.biz/business/25-reasons-financial-literacy-is-important/, originally written on February 13th, 2013.

How Have Mutual Funds Performed Over the Last Decade?

Based on the stock market crashes in 2001 and 2008, many investors are thinking to sit out the next decade and wait for the next market crash before investing.  Is this a good idea?

First of all, trying to time the market remains to be extremely challenging.  For those who are waiting to sit out, most likely this will occur.  As the stock market continues to climb, you will be patiently sitting on the side line waiting for the perfect moment.

In the mean time, investors will slowly be making gains over the next ten years.  One day, the market will be over valued and another crash will occur.  However, even after the crash occurs, investors will have enough growth that their returns will still be decent.  Meanwhile, you will have undoubtedly spent that money on something else or used it in some other way, having strayed from your original plan to wait for a crash.  I mean ten years is a long time to wait.

Let's suppose you did have patience.  The you will be stressing out about the exact right time to get into the market.  Rather than using time tested principles, you will try to time the market.  Then, you will closely watch after a purchase and be completely proud of yourself.  The market will drop even more because your timing is off.  You decide that your ten years was wasted and you end up selling because your fear of the market dropping has come true.

Meanwhile, the disciplined investor continues to stay in the market, making small gains over a long period of time.

According to www.marketwatch.com, "A new study by Russel Kinnel, director of fund research at fund tracker Morningstar Inc., sheds new light on just how badly most investors do when it comes to moving their money around. Over the past decade, Kinnel found that the average mutual fund returned 7.05%, but that the average investor – based on asset-weighted returns that use the inflows and outflows to see how much of a fund’s performance the shareholder captures – netted 6.10%."

Is it smart to get in and ride it for the long haul or try to time the market?

This post was reposted from http://finlit.biz/retirement-2/how-have-mutual-funds-performed-over-the-last-decade/, originally written on February 12th, 2013.

Are You Utilizing a ROTH Retirement Account?

Most people either use a ROTH IRA or a ROTH 401(k) account.  This is one of the best accounts for purposes of generating retirement income and accumulating wealth tax free.

The idea is that you use after tax money to fund a retirement account and any earnings on the account are distributed after age 59 1/2 without the need to pay taxes.  This type of account was made available for middle income families.

According to www.ehow.com, "Named for its legislative sponsor, William V. Roth Jr., Republican senator from Delaware, the Roth IRA became available in 1998 as part of the Tax Relief Act of 1997."

Are you using your ROTH< account wisely? Be sure to read Can You Contribute to Both a ROTH IRA and a ROTH 401k? for the 2013 contribution limits.  Thanks for visiting and we will be sure to provide new information daily.

This post was reposted from http://finlit.biz/retirement-2/are-you-utilizing-a-roth-retirement-account/, originally written on February 12th, 2013.

What is Residual Income?

According to voices.yahoo.com, residual income is "Do something once and make money on it for the rest of your life."

Sometimes residual income is described as an income stream generating income 24 hours a day, 7 days a week, whether you work or not.  Most residual income streams do require work to maintain.

From voices.yahoo.com, 6 examples of residual income include:

1. Royalties from intellectual property, such as books and patents
2. Advertisements or affiliate links on your blog or website
3. Subscriptions or donations to your blog or website
4. Investments in securities such as stocks and bonds (these are actually considered "portfolio" income by the IRS)
5. Sales of online photographs or videos
6. Creation of a business and then hiring someone to run it for you

From voices.yahoo.com, 4 reasons to create a residual income are:

1. You have the potential to be financially independent. You could ditch your job if your residual income streams produce enough money. Even if you don't, you'll still be in control over how much you make (it all depends on the effort you put into it).
2. Making money shouldn't be the primary focus of life. Residual income allows you to make money while doing more important things with your time.
3. You can stop "working" altogether and still have income coming in. This is critical if you get sick or injured or have to divert all of your time to dealing with some other type of emergency. Or if you want to take an extended vacation. Or for any reason really.
4. Most residual income streams are location independent. This means it doesn't matter where you live. This fact alone gives you a huge amount of independence. You can live wherever you like and still make money.

This post was reposted from http://finlit.biz/retirement-2/the-science-of-learning-tony-robbins-10-50-90-learning-rule/, originally written on February 11th, 2013.

Can You Develop a Portfolio With Little Experience?

What does it take to create a strong portfolio?  With all the advice out there and trends, how do you know what is right for you?

According to finance.yahoo.com, "Marcin says investors should buy stocks of companies they believe in first and foremost, with the yield coming second. Paradoxically, stocks with high yields can be the least safe on the market. When you see a name kicking off 5 or 6% while the rest of the blue chips are yielding half that, it's a sign that institutional investors are skeptical of both the company and its ability to pay the listed dividend."

When developing a portfolio, you definitely want stock that is paying dividends.  The question is how much.  In general, it depends on your investing style and your needs.  However, having a portfolio with 40-60% of dividend paying stocks of solid companies is a great start.

Asset allocation and diversification is also extremely important.  For example, bonds and real estate might add some great value to your portfolio.

This post was reposted from http://finlit.biz/retirement-2/can-you-develop-a-portfolio-with-little-experience/, originally written on February 11th, 2013.

How Have the Baby Boomers Been Affected by the Real Estate Crash?

According to www.crainscleveland.com, "The big problem: Their retirement savings and home values fell sharply at the worst possible time, just before they needed to cash out. They also are supporting both aged parents and unemployed young-adult children."

Do you see the same problem?  How has your family been affected by the recent real estate bust?  Did they prepare?

From Proverbs 21:20, we see "In the house of the wise are stores of choice food and oil, but a foolish man devours all he has."  Read more at www.daveramsey.com.  Dave Ramsey has quite the collection of biblical verses which apply to money and wealth.

What is amazing about our baby boomers is far and wide, they take responsibility for their choices and their situations.  In general, the baby boomers with which I have spoken, state that they are in the situation they are in because of the choices they have made.  They advise the young to plan a little better and save a little more.  Real estate alone cannot be the solution.

I just wanted to stop to say that I appreciate all the readers out there.  Thank you so much for continuing to bring about awareness.  It all starts with you.  You can grab a fish to eat for a day or learn how to fish.  I thank you for learning how to fish!

This post was reposted from http://finlit.biz/retirement-2/671/, originally written on February 8th, 2013.

What Was the Average Retirement Savings for 2010?

According to www.newsobserver.com, when it comes to retirement, “The problem is we won’t see the ultimate brunt of it until 30 years down the road when it is too late to do something about it” as stated by Diane Oakley, executive director of the National Institute on Retirement Security.

The article continues, stating that "The Federal Reserve says that in 2010 the typical household headed by people between ages 55 and 64 had just $120,000 saved in retirement accounts."

How long does the typical retirement last?  How long will $120,000 last here in Silicon Valley?  When was the last time you took a good look at where you were headed financially?  Can you do it on your own?  Should you do it on your own?

This post was reposted from http://finlit.biz/retirement-2/what-was-the-average-retirement-savings-for-2010/, originally written on February 8th, 2013.

3 Reasons Why You Don't Need to Purchase Gold

When you purchase gold, are you purchasing an asset or a liability?  In this question, it may be important to define the term asset.

According to www.actionablebooks.com, "An Asset is something that puts money in my pocket".

So, does gold actually put money into your pocket?  Does gold make any money?  Rather than focus on rate of return, it is probably more important to focus on cash flow.  Over time, would you rather have assets that are generating a cash flow or have to be sold to get access to their money?  Would you rather have assets that generate a cash flow and can be passed onto your children in order to continue generating cash flow for them?

Here are the 4 reasons you might not want to purchase gold:

1. Gold is not a cash flow producing asset
2. Gold is speculative, meaning that its value is based on investor perception
3. Gold is just one of many investments which protect against inflation risk

Do you believe that gold has its place in a diversified portfolio?  Should you purchase gold as your only investment or have a strategy in place and a particular reason for purchasing gold?

What do you think of the article at onecentatatime.com?

This post was reposted from http://finlit.biz/retirement-2/3-reasons-why-you-dont-need-to-purchase-gold/, originally written on February 7th, 2013.

Cash Value Life Insurance Versus Reversed Mortgages

Have you ever heard that cash value life insurance is great because you will be able to live a "tax free" retirement by taking a loan from your policy?  The first question you need to ask is whether a loan is a liability or an asset and whether you prefer to add liabilities or assets to your portfolio.

You may also compare the option of taking a loan from a cash value life insurance policy with other vehicles which allow you to take loans.

You may also take loans against any asset that you have, such as a retirement account or home.  If you decide to do this, be careful as you may have stipulations in place that determine how many loans you may take against the asset, the details for paying back the loan including who gets the interest and how much percentage of the asset's value you may loan against.

If you take a loan against your home through a reversed mortgage, you may be able to take equity out of your home.  You will be required to pay for home insurance and property taxes to have access to this loan.  This is very similar to having to pay for life insurance to have access to the loan of a cash value life insurance policy.

Which would you do?  Would you rather be forced to pay for the costs related to your home or the costs related to the increasing cost of life insurance?

Read more at www.allrmc.com.

This post was reposted from http://finlit.biz/retirement-2/cash-value-life-insurance-versus-reversed-mortgages/, originally written on February 6th, 2013.

5 Obligations for a General Public Company

In general, public companies have various items they need to pay before they can claim a profit.  If you are an investor, do you know the various items and where you are on the list as far as when you will get paid?

If you were a creditor for a real estate property, wouldn't you want to know whether you were the first to get paid or the last on the list to get paid?

Here are the obligations for a general public company, ranking from the order in which they get paid:

1. IRS Taxes
2. Debentures or Unsecured Debt
3. Bonds or Secured Debt
4. Preferred Stock
5. Common Stock

Most people purchase common stock and don't realize that the company must pay off all debt before they can pay a dividend on common stock.  Even the preferred stock holders must wait until the debt gets paid.  In some cases, the company will claim bankruptcy and all proceeds will go to paying off debt, leaving the shareholders with nothing.

Read more at useconomy.about.com.

This post was reposted from http://finlit.biz/retirement-2/5-obligations-for-a-general-public-company/, originally written on February 5th, 2013.

10 Investments Ranked From Least Risky to Most Risky

Have you ever considered how risky the investments in your portfolio are?  While this is not an exact science, we will list here several investments from the least risky to the most risky in terms of the general stock market.

What would you say should be the majority of a portfolio for an investor with short term needs?  What about an investor with a very long term investment horizon?

Here are the investments:

1. Cash, Certificate of Deposits, Money Market Accounts, Money Market Funds
2. Treasury Bills, Treasury Notes, Treasury Bonds
3. State Bonds, Municipal Bonds
4. Corportate Bonds
5. S & P 500 Passive Index Funds
6. Large Cap Fund
7. Small Cap Fund, Mid Cap Fund
8. Individual Stock, International Funds
9. Sector Funds, Real Estate Funds, Commodities
10. Stock Options, Futures Contracts

In general, cash accounts and accounts used to lend money between banks have little risk.  US government backed treasury investments also have a great track record and thus have little risk.  Moving into State and Municipal Bonds, there is little risk because cities and districts rarely go bankrupt (although both Stockton and Vallejo recently went bankrupt in California).  Corporate bonds are less risky that stock since debts must be paid before shareholders.  General funds for larger companies are the first of the higher risk investments, but still a little conservative.  Then individual funds, sector funds and various derivatives tend to be the most risky investments.

Do you agree with this general assessment of risk?  Read more about other types of risk at stocks.about.com.

Thanks for reading! Upcoming posts will discuss more about what a company is required to pay as well as derivatives.

This post was reposted from http://finlit.biz/retirement-2/10-investments-ranked-from-least-risky-to-most-risky/, originally written on February 5th, 2013.