Since I was having so much fun last month learning about new financial words, I think that I would like to continue doing that since I have only gotten to the letter âFâ so far. As I learn more and more about money, I realize just how much I do not know about money and finance. That is not a good thing in my opinion because knowledge is power and my finances are definitely something that I want to feel empowered about. So, onward we go with more financial words.
A guarantee is the assumption of responsibility for payment of a debt if the original debtor fails to pay. It is never a good idea to guarantee something if you cannot afford to pay for it, in fact financial experts recommend that individuals steer clear of guaranteeing debts for others unless they fully expect to be held responsible for the debt.
When you buy into a mutual fund or life insurance policy, be certain to read the fine print carefully and read it more than once. Today I learned about the concept of hidden load, which is a sales charge that is buried in the fine print of a mutual fund prospectus or life insurance policy. Since we cannot count on the companies that sell these financial products to be clear in disclosing their fees, make sure to protect yourself by reading, rereading, and possibly even having another set of eyes take a look at the paperwork before you buy.
Sometimes a simple definition says it all. Investment is the creation of more money through the use of capital. Capital is money that is specifically available for the purpose of investing. There are so many ways that a person can invest money that he or she can afford to have tied up for a little while (or a long while) and the return for each type of investment varies greatly. Some examples of investment options include stocks, real estate, bonds, and mutual funds. It goes without saying that before a person invests in something, they should carefully assess whether it is likely to provide a good return and when they could realize that return.
Photo by alvimann on morguefile.com.