Comparison Of Different Types of Investment Vehicles
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The following chart summarizes the types of available investment vehicles so you can compare them to each other easily.
For more information about each type of investment vehicle, including a description of what it is and how to maximize their use see: Investments: Basics. For instance, the article describes how to maximize interest rates on CDs.
Type |
Rate of Return(Specific rates are rounded, for a 10 year time-period, and do not necessarily predict future performance.) |
Liquidity |
Marketability |
Risk |
Taxes |
Checking & Savings Bank Accounts |
Rates for these "cash equivalent" type investments vary directly with the interest rate.Current rates vary from less than 1% for some checking and savings accounts to up around 5% for some Certificates of Deposit and Money Market Accounts.Online savings accounts usually have better rates than local brick-and-mortar banks. www.bankrate.com Information about the financial stability of your bank is available by clicking here  |
Very high |
Very High |
Risk-free up to $250,000 due to FDIC insurance. |
All interest is taxable at your ordinary income rate, whether you withdraw the interest or not. |
Certificates of Deposit (CDs) |
High, but early withdrawal penalty may apply. |
Very High |
Risk-free up to $250,000 due to FDIC insurance. |
Interest taxed at your ordinary income rate. | |
|
Money Market Accounts |
High |
High |
Low. No loss of principal but rates fluctuate with interest rates. |
Earnings taxable at ordinary income rates. Tax-exempt money market mutual funds available. | |
|
Treasury Bills (T-Bills) |
4% |
High |
High |
Virtually Default Risk Free |
Interest taxable as income but ONLY at Federal level. Possible capital gains taxes. |
|
Treasury Notes and Bonds (T-Notes and T-Bonds) |
5% |
High to moderate; may have to sell at a loss if interest rates have increased. |
High |
Virtually none; backed by US Govt. Some risk the interest rate may change. |
Interest taxable as income but ONLY at Federal level. Possible capital gains taxes. |
|
Municipal Bonds |
Varies with type of bond (taxable vs. non-taxable.) |
Moderate |
High to moderate |
Low to moderate. Municipal bond insurance is available. |
Interest is exempt from federal taxes; may be subject to state or local taxes. Capital gains may apply. |
|
Corporate Bonds |
5% |
Moderate |
High |
Moderate: Varies with the financial strength of the underlying company. |
Interest is taxable and capital gains taxes may also apply. |
|
Stocks |
7-13% |
Low |
High to Low, depending on whether or not the stock is actively traded. |
Moderate to Very High: Varies with the size/strength of the company or, in a fund, companies owned by the fund. |
Unless held in a tax-deferred retirement account, dividends taxable at ordinary income rates and capital gains. |
|
Real Estate |
N/A |
Very Low |
Moderate/Low |
High |
Varies |
|
Gold, Silver & Collectibles |
N/A |
Very Low |
Moderate to Low |
Very High |
Capital Gains on collectibles taxed at 28%. |
|
Futures, Commodities, and Options. |
N/A |
Very Low |
Moderate to None |
Very High |
Varies; some may generate large short-term capital gains and/or losses. |
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