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  1. DEBT & EQUITY INVESTMENTS What Are the Differences between Debt & Equity Investments While both debt and equity investments can deliver good returns, they have differences with which you should be aware. Debt investments, such as bonds and mortgages, specify fixed payments, including interest, to the investor. Equity investments, such as stock, are securities that come with a "claim" on the earnings and/or assets of the corporation. Common stock, as traded on the New York or other stock exchanges, is the most popular equity investment. Debt and equity investments come with different historical returns and risk levels. DEBT INSTRUMENTS Debt investments tend to be less risky than equity investments but usually offer a lower but more consistent return. They are less volatile than common stocks, with fewer highs and lows than the stock market. The bond and mortgage market historically experiences fewer price changes, for better or worse, than stocks. Also, should a corporation be liquidated, bondholders are paid first. Mortgage investments, like other debt instruments, come with stated interest rates and are backed up by real estate collateral. EQUITY INVESTMENTS Fortunes can be made or lost with equity investments. Any stock market can be volatile, with rapid changes in share values. Often, these wide price swings are not based on the solidity of the organization backing them up but by political, social or governmental issues in the home country of the corporation. Equity investments are a classic example of taking on higher risk of loss in return for potentially higher reward. LEGAL DIFFERENCES Debt instruments, whatever they may be called, are corporate borrowing. Instead of procuring a straight commercial bank loan, the organization "borrows" from a variety of investors. This is why debt instruments, such as bonds, come with a stated interest rate, as a loan would. Equity investments offer an ownership position in the company. Owning stock makes the investor an owner of the organization. The percentage of ownership depends on the number of shares owned as compared with the total number of shares issued by the corporation. INVESTMENTS GOALS AND RISKS Depending on your investment goals, these differences may strongly influence your preferences. All investments come with risk. However, debt instruments offer less risk than equity investments. Your investing targets may favor equity investments, if you're seeking striking growth or profit potential. Conversely, you might focus on debt instruments when you prefer consistent income and less risk. Tailor your investment actions to match your objectives and risk tolerance.
  2. DEBT & EQUITY INVESTMENTS What Are the Differences between Debt & Equity Investments While both debt and equity investments can deliver good returns, they have differences with which you should be aware. Debt investments, such as bonds and mortgages, specify fixed payments, including interest, to the investor. Equity investments, such as stock, are securities that come with a "claim" on the earnings and/or assets of the corporation. Common stock, as traded on the New York or other stock exchanges, is the most popular equity investment. Debt and equity investments come with different historical returns and risk levels. DEBT INSTRUMENTS Debt investments tend to be less risky than equity investments but usually offer a lower but more consistent return. They are less volatile than common stocks, with fewer highs and lows than the stock market. The bond and mortgage market historically experiences fewer price changes, for better or worse, than stocks. Also, should a corporation be liquidated, bondholders are paid first. Mortgage investments, like other debt instruments, come with stated interest rates and are backed up by real estate collateral. EQUITY INVESTMENTS Fortunes can be made or lost with equity investments. Any stock market can be volatile, with rapid changes in share values. Often, these wide price swings are not based on the solidity of the organization backing them up but by political, social or governmental issues in the home country of the corporation. Equity investments are a classic example of taking on higher risk of loss in return for potentially higher reward. LEGAL DIFFERENCES Debt instruments, whatever they may be called, are corporate borrowing. Instead of procuring a straight commercial bank loan, the organization "borrows" from a variety of investors. This is why debt instruments, such as bonds, come with a stated interest rate, as a loan would. Equity investments offer an ownership position in the company. Owning stock makes the investor an owner of the organization. The percentage of ownership depends on the number of shares owned as compared with the total number of shares issued by the corporation. INVESTMENTS GOALS AND RISKS Depending on your investment goals, these differences may strongly influence your preferences. All investments come with risk. However, debt instruments offer less risk than equity investments. Your investing targets may favor equity investments, if you're seeking striking growth or profit potential. Conversely, you might focus on debt instruments when you prefer consistent income and less risk. Tailor your investment actions to match your objectives and risk tolerance.
  3. Let's assume a finance detective approaches you and asks: "Who loves to have a dependable car?" "Who loves to own a house?" "Who loves to dress well and be the talk of the town?" I am certain he will get the same reaction from you as the one playing out in my head. The right question actually is, "Who doesn't?" We live in a materialistic world and it is absolutely normal for people to desire good things. However, when you live in a society where the economy is not friendly, it is crucial to be careful when sorting our priorities. The word 'Debt' is not new to man and has been the cause of some drastic decisions that people made in our society. Have you ever been in a situation where you were not able to handle an emergency due to lack of adequate finance? Or you had issues with your friends and loved ones because you owed them a lot of money and couldn't pay back? Or ever seen cases where people lose their lives owing to a build up of stress over accumulated debt? Very recently, the news of a major oil firm bedevilled by crippling debts was trending. Though the borrowed funds were meant for business expansion, the day of reckoning eventually arrived. That's what happens with debts; as the day of reckoning draws close, the heart of the borrower beats faster. However, there are practical ways to staying debt free. Let's discuss some. First, make a budget. Creating a budget helps you avoid overspending. Though you earn a great income, it is not wise to spend beyond your budget. It will only leave you with less money and your family gets affected. Creating a budget helps you to set your priorities right. It will enable you to make the right sacrifices to financial stability. You may have to cut down on some luxuries like taking a vacation abroad, eating out every weekend, going to the movies on Saturdays, wearing the latest designer clothes and shoes, and many more of that. You will learn to be more resourceful and seek our less costly luxuries. Instead of expensive vacations in a very faraway country, you can find equally luxurious ones less faraway and costs less. Parents should also re-orientate their children in being prudent with money and cut down on requesting for meaningless luxuries. In order to be debt free, know exactly how much you earn, how much you spend and how much you should spend. Monthly is most recommended. This will help you cut out unnecessary expenses and ensure you live within your means. Secondly, nurture self-control. In the society we live in, people feel pressured to keep up with the latest fashion and trends. I once heard a quote; "Don't try to live up to the Jones, the Jones are broke." Life is all about how you make most of what you have; so restrain your thoughts and focus your your mind on the things that matter the most. That's one sure way of escaping the trap of grabbing everything that appeals to you and accumulating unnecessary debts. Contentment is a must-have virtue; life is not all about expensive toys. Always remember that if you keep spending money on things you don't genuinely need, someday you will have to sell the things you need when the storm of life comes. But if you've been prudent in keeping your expenses low and your savings/investment fat, you are better positioned to weather the storms when the assuredly come. Lastly, save, save and invest. Set savings/investment goals and draft a plan on how to achieve them. You want your children to attend one of the best schools? Good, plan towards it; start saving in an education fund/account for it. When the focus isn't on immediate gratification, you make smarter decisions. You want to own a house? You want the best for your children? That's beautiful, all you need to do is to save for it. Saving for a long term goal also gives you the time to consider if you really want that particular thing. Always monitor your spending. For you to save better, trick your mind into believing you make less income. And in truth, there were years you made less income and lived well. Just don't let your mind get used to spending everything you earn. This will help you put more money aside -- the extra from the salary raise, the new side income etc -- for the long-term financial goals you want to achieve, for example, buy a house, take your family on a vacation. In summary, to become debt-free: change your habits and develop a healthier way of spending. Staying debt-free helps individuals and families to live happily. They are able to avoid unnecessary stress, achieve more and build better relationships.
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