Personal Finance Investing

In personal investment finance funds are used for the purchase of shares or any other collective investment schemes. It can also be used for the purchase of assets which are subject to capital risks. The following are the kinds of personal investment finance:

Personal finance Investment in Real Estate

Here money is used to purchase property which can be used for personal purpose or leased out to earn some income. This investment is subject to capital gain or loss as the value of property may fluctuate. Real estate may be of two types:

1.Residential real estate:

Here the property that is purchased is houses of people. In certain cases, to facilitate such purchases, the buyer arranges for a lender. This lender can be a bank, a financial organization or a private lender. Due to very low levels of risk associated with lending for residential real estate, the lending rates are high, ranging from 70-90% of the purchase price.

2.Commercial real estate:

Here investments are made for the purchase of houses large or small which are later used for renting to business purposes. Investments in commercial real estate is associated with high levels of risk and hence invite lower lending rates ranging from 50-70%.

Other Major Sectors for Personal Finance Investment

Mutual funds: mutual fund is a company that pools the investors’ money to purchase bonds and stocks. This allows for portfolio diversification

Money Market Securities: they are most safe and liquid form of investment available. Investors who are risk-averse invest in such securities and they function through the money market dealers money center banks and Open Market Trading Desks. The money market securities are Treasury Bills, Certificates of Deposits, Commercial Paper and Money Market Funds.

Bonds: Bond is a debt security. The person who invests in bonds becomes a bond holder and is required to pay the issuer the principal and the interest which is termed as the coupon at the committed date of maturity. So a bond can be called a loan in the form of a security.

Common stocks: Common stocks are the ordinary shares held by the public in the corporation. The stocks that can be repurchased are known as treasury stocks. These stocks are the last in the liquidity line. They receive their dividends after the preferred stockholders.

IPOs: The Initial Public Offering is the first sale of the common shares of an organization in the public stock exchange. When the shareholder sells the shares then it is called the secondary offering which occurs in the secondary market and earns the shareholder profit or a loss.

DPOs: This is the Direct Public Offering of a company directly to its employees and customers. The DPOs are less costly in comparison to the traditional underwritten offerings.