Forex vs. Bonds & Long Term Saving

Investing In Bonds vs. Forex

Investing in bonds and the savings bank is safer as we will see. But if you are adventurous, and have some risk tolerance, you can make a great deal of money trading currency on the Forex.

This post was written primarily for the smaller investor who needs high yield, the person who has between, let us say, $5,000 and $100,000. If the $5,000 investor secures a return on his money not of 3%, or $150 per year, but 12% $600 per year his benefit will be material, not nominal.

If the $100,000 investor receives not $3,000 but $12,000 the difference is great enough to mean complete financial independence.

While theoretically the large investor, the one with $1,000,000 and up, does not need to consider such investments, because his $1,000,000 in the savings bank yields him $30,000 a year, or his investment in tax free bonds at 4% yields him $40,000 a year not subject to income tax, strangely enough this is the type of investor who invests the most heavily in the types of opportunities examined in this book. Some of the very largest aggregations of capital in the world do little other than invest in mortgages at discounts, foreign loans, real estate syndicates, and investment partnerships.

Strange as it may seem, the person least satisfied with a low yield is often the very wealthy person. If such people invest in the opportunities examined in this book, these opportunities deserve at least a quick survey by the smaller investor. There may very well be a good reason behind the saying that the rich get richer and the poor get poorer. The rich may know how to invest more intelligently with more information available to them.

In a stable economy we might consider high rate investments as desirable but not necessary. But we are not in a stable economy. We are in an economy in which every year our fund of savings is worth less. Dollars in themselves mean little. They have meaning only insofar as they can purchase goods and services. Let us see how this purchasing power of the dollar fared since the end of the war.

With 1947-1949 equal to 100%, consumer prices rose to 102.8% in 1950. If we consider that at this point in history, the year 1950, we have $102 in the savings bank at 3% interest we can get a strikingly clear idea of savings in a period of inflation.

By 1960 in 10 years consumer prices had risen to 126.5%.

Now if the $102 in the bank in 1950 drew 3% interest, after a hypothetical tax of 33%, the owner of the $102 savings account would find by 1960 his account had grown to $122. His interest didn’t even enable him to keep up with inflation. He was actually poorer in 1960 than he was in 1950.

If a person were in the 50% tax bracket 4% compounded annually would amount to the same thing. He would have $122 in 1960, the same amount that the person in the 33% bracket would have with his return of 3%.

Although Forex is riskier, you also stand to gain a lot more. That said, you shouldn’t risk more than you can afford to lose. AS with most investments, the more risk, the larger the possible reward.

Long Term Saving vs. The Forex

Long term savings plans will often be a very sound investment as we will see in this article.

Although Forex can make you much more in a smaller amount of time, but there is more risk involved.

The American economy is a free economy. It operates on the principle that if we leave the factors of production alone, without government interference, so long as the game is played fairly and honestly, the great majority of people should benefit from their hard work/labors.

For the American economy to operate, each investor must seek the highest return on his capital obtainable consistent with risk.

This is not only the justifying theory behind rate of return. It explains why certain industries need money and can pay a good return

The individual usually needs little urging to be converted to the doctrine that if he can get 10% on his money rather than 6% with the same degree of risk, he should do that. This article attempts to show him the opportunities to place his money in higher yield investments. But first it might be well to explain just how significant the rate of return on your money is:

A short time ago our very close friends invested $1,000 in a promissory note which yields 12% per year 1% per month payable monthly.

Both the husband and wife work, the husband works for the government and the wife works as a pharmacist. It is their desire that before too long the wife cease work and retire permanently. But they are used to getting along on 2 salaries, not just 1, and the retirement of 1 of the couples, will cut the family income substantially. Since the children are grown and out on their own, they feel that they can save $200 per month.

This will come out of the wife’s income. She has not saved this much to date, mainly because there didn’t seem to be any great motivation to save, and she seems to like to do a great deal of shopping. So, a forecast of her savings of $200 a month was drawn up in order that she might have the facts at hand on which she could base a decision as to whether she should attempt to save $200 every month or not. This is how the forecast works out:

On January 1, 1961 she invested her first money 1,000 and at the end of the first month her interest check on this $1,000 was $10 (1% per month). She did not spend this income but let it stay in the account in order to become capital and thus increase the earnings base. But at the end of January she put in her first periodic monthly savings of $200, so that at the end of January her original capital in the account was $1,000, the interest was $10, and the monthly savings were $200, $1,210 in all. The interest on this total capital during February was.

At the end of the first year she has put in a total of $3,400, but the interest has made this total investment grow to $3,662.

In the normal course of her business career her income will go up slightly each year as she progresses in her job, but she probably will be able to save no more as these increases take place because she must pay taxes on her interest, whether she receives it and spends it or just lets it remain in her account to increase her capital.

By January 1, 1980, when she retires from business at age 63, her capital amounts to $108,476 on her total savings of $15,400. Her monthly interest check amounts to over $1,000, and this is in addition to her pension from her pharmacist’s job and her husband’s pension from the government

Is all this calculation fanciful? It may be, but I personally many people have had funds invested in this particular company for five years, and the only thing that hap pens is that the company grows, gets sounder and earns more money each year. Eventually they will not pay 12% per year in all probability. Then it will be necessary to find another similar investment.

We could further define the type investment we are talking about as high yield, fixed dollar obligations. The obligation part of the definition means that someone or some organization has an obligation to repay the money invested.

The fixed dollar part means that there is an obligation to repay a fixed number of dollars. While oil wells and citrus groves may be excellent investments and return fine profits, there is no obligation on the part of anyone to repay any fixed number of dollars.

While the Forex can possibly make you much more short term, you could also possibly lose much more.

Successful Forex Trading Practices – https://www.mastersofmoney.com/successfulforextradingpractices/



Risk disclosure: *All investments involve risk. Before making any financial or investment decisions, we highly advise that you seek the advice of a properly licensed and trained investment professional.

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