Benefits and Demerits of Investment Types

Introduction

Basically, the banking firm offers a number of secure investments. In this paper, someone intends to invest 1000 dollars. The types of bank investments may encompass: Checking account; Money-market account; Passbook-savings account; and Certificate-of-Deposit (Bluman, 2005). The objective here is for the investor to receive the utmost probable interests for his/her invested dollars whilst benefiting from suppleness in accessing his/her account. This paper aims at investigating the merits and demerits of each investment type, so as to assist the investor in selecting the type of account that best suits him/her.

Benefits and Demerits of Investment Types

A Checking-account is simply an account type that is most appropriate for investors who are seeking for an access that is regular and uncomplicated, and are not attempting to engender a return, even though a number of them bear interest. Idyllically, this account will best suit those individuals who normally write checks more often, and want online banking to be of expediency. These account types also have disadvantages. In a number of banks, it is of necessity for their customers to: have a minimum deposit of opening the account; sustain the minimum monthly balance; and imposition of a fee the moment a customers passes that amount. However, opening a free-checking account can be useful in resolving these demerits (Rosenbaum, 2009).

The money-market account, as Rosenbaum (2009) puts it, “Is an interest bearing savings account with check writing privileges” (p.740). Actually, it suits an individual who easily want to access his/her cash, but less often in comparison to a regular customer account. Its merit is that it is capable of engendering a higher rate of interest, and also, an investor is able to access his/her cash at any time. Conversely, its demerit is that it is a must for a customer to maintain a monthly-balance that is relatively higher in comparison to that of the checking account. In fact, in a month, a customer is only allowed to withdraw six times as well as write only three checks. These demerits may become minimal in cases whereby a customer aims at using money to generate more cash (DePamphilis, 2008).

In the Passbook-savings account, the teller of the bank will record all the transactions in the customer’s book during the customer’s individual visits. The merit of this account type is that it permits compounding. Supremely, this strategy can be employed by investors in tripling or doubling their cash in a diminutive time period. Furthermore, this account type will best suit the infrequent visitors of the bank because it has withdrawal restraints. Nonetheless, the customer’s passbook has the following contents: all interests; entire credits; entire debits; and all the withdrawals.

The disadvantages of this account type will mainly affect those individuals who do not aim at investing their cash. In actual fact, a 30-day notice may be required by the bank prior to withdrawal and a customer may be requested to close his/her account. Moreover, the passbook-savings account does not suit those individuals who carry out bank transactions more often, but suits those individuals who aim at investing their cash because it is capable of generating higher interests depending on the amount invested (Jagger, 2008).

The Certificate-of-Deposit account is uncomplicated to comprehend as its interest generation is on the basis of a term-of-investment. However, its major demerit is that a larger withdrawal feel is likely to be incurred by a customer, especially if he/she withdraws his/her cash before the investment term. Thus, in comparison to the money-market account, this account type is deemed to be a less lithe investment, and thereby being an option that is of little benefit (Rosenbaum, 2009).

Conclusion

For the investor’s needs, it is of necessity for him/her to place 500 dollars in the Certificate-of-Deposit account and the remaining 500 dollars in the passbook-savings account. Monetarily, it is of necessity for someone to invest his/her money in at least one investment alternative. This is especially useful in emergency cases whereby someone has to access his/her funds urgently. Therefore, we can say that these two account types (that is passbook-savings and Certificate-of-Deposit) are regarded as being the best because the investor focuses on engendering a first-rate return, as well as accessing his/her cash the moment he/she needs them.

References

Bluman, A. G. (2005). Mathematics In Our World. New York: McGraw-Hill Publishers.

DePamphilis, D. (2008). Restructuring Activities, Acquisitions, and Mergers. New York: Academic Press.

Jagger, S. (2008). Wall Street Bank Investment. Web.

Rosenbaum, J. (2009). Investment Banking: Evaluation, and Leveraged Buyouts. Hoboken- NJ: Wiley & Sons.

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