In: Finance
Product | Risk | Advantages | Fees |
CD | Very Low-Risk | Issued by commerical banks, hence they are very low-risk as they are insured by FDIC. They are available for both long and short term maturities. They are available with fixed interest rates | No fees |
Savings Account | Very Low-Risk | Money is kept safe. It is very low-risk as they are accepted by commercial banks and insured by FDIC. Interest is earned on savings | Low fee. Minimum balance may be required |
Govt. Bonds | Risk-Free | Risk-free as they are guaranteed by Central Bank/Governments. Available for all maturities. Coupon bonds, coupon-free bonds, STRIPS are available. | No fees |
Car Loans | Risk of changing interest rates in case of floating-rate loans | Upfront money to buy a car is difficult. Loans can be utilized to own car and pay instalments over time. Interest is tax-deductible for businesses | Fee may be charged in form of mortgage points, processing fee, or insurance |
Housing Loans | Risk of changing interest rates in case of floating-rate loans | Upfront money to buy a house is difficult. Loans can be utilized to own a house and pay instalments over time. | Fee may be charged in form of mortgage points, processing fee, or insurance |
Mutual Funds | Low to above-average risk based on type of mutual fund - debt, equity, or hybrid | Passive investors can invest in the markets by investing in funds which are professionally managed. Various kinds of mutual funds available for a wide range of investment objectives | Fee is in the form of % of AUM. Distribution fee may be charged by distributors |
T-Bills | Risk-Free | Risk-free as they are guaranteed by Central Bank/Governments. Available for maturites upto 2 years. Coupon bills, coupon-free bills, STRIPS are available. | No fees |
Equity Stocks | Average to high risk | Higher expected returns as they are riskier. | No fees |
Credit Cards | Average to high risk | Instant credit available. Can be used at POS, online transactions, and ATMs. | High fees in the form of interest, processing fee, annual maintenance charges, transaction charges etc. |
Private Bonds | Below average to high risk | Higher interest than government bonds. Lower risk than equities | No fees |