Explain why individuals should specify investment goals and understand Essay

Explain why individuals should specify investment goals and understand sources of risk and return Define basic investing terminology - Essay Example Mutual funds on the other hand are collective funds in which individual contributions are pooled together as one and invested in a financial instrument. Mutual funds are less risky since the risk is diversified between owners and different instruments. Mutual funds are invested in buying stocks, currency exchange and bonds. Bonds on the other hand, are units of debt held by an individual for claim against an invested amount. Bond is a form of lending that earns interest to the holder.The company is expected to pay interest yield upon maturity of the agreement. An annuity refers to yearly payments or receipts on an investment while dividends are shares of profits divided amongst shareholders at the end of a trading period according to the number of shares owned. Before investing, it is important to understand the goal for investment. This allows you or an investment advisor to suggest the best investment plan for your plans since different investments have different return spreads and risk. In knowing your goals, it will also allow one to know their risk appetite before investment. The main reason of understanding the source of risk is to enable one know where to invest in order to diversify their investment portfolio. It helps one avoid placing their eggs in the same basket to avoid losses. In my watch list I have listed Coca- Cola ( KO), ExxonMobil ( XOM) ,Merck ( MRK) Tupperware ( TUP), Washington Real Estate Investment Trust ( WRE),Apple Inc.(AAPL),Twenty first Century Fox(FOXA),American Airlines(AAL),Bank of America(BAC) and Google Inc.(GooG).Coca-Cola is the leading supplier of soft drinks yet to be rivalled in the world by any company which makes it a safe company to invest in for it goodwill and market share. Bank of America and Apple Inc. have entered into a partnership for the apple pay mobile service. The new product is set to boost performance of both stocks as demand for the new product increases. With the launch of the new Apple 6