Most financial investments mean that you have a guaranteed principal and this is put down in the written agreement. The investments do not guarantee fixed returns but the principal remains guaranteed throughout the tenure of the investment. These are also known as secured investments. While not much can be expected by way of returns through this route of investment, there are loads of issues on the contrary. Opting for a guaranteed principal mode of investment means that you cannot withdraw the principal come what may. It will be disbursed to you only when the tenure of the investment is complete. This is as good as locking up your money in your own locker.
However, the American economy is far more advanced than this theory. No one would want to see his or her money sit idle in the bank and in return getting close to nothing by way of returns. Banks and financial institutions are required by law to guarantee the principal amount of the deposit that is being entrusted to them. They do this and at the same time, they ensure that the clients get a sizeable income. This way the clients are happy with some extra cash coming their way and the finance companies are happy too with the extra income they keep for themselves.
Wisdom prevails today in the American economy. Financial gains are widespread if the investments are made with prudence and judicious thinking. While guaranteed principal amounts remain the main prerogative today, interest incomes are increasing. A few months ago, the real estate market was tottering with foreclosures and mortgage failures being in charge. Things are changing for the better now. Real estate properties are now becoming the safest havens for investments with excellent returns. The stock markets are firming up and judicious investments in the stocks can fetch excellent long-term returns. Cash value life insurance is also becoming increasingly popular. With this in mind, there is a growing favor for keeping the guaranteed principal fixed while looking out for safer interest income options.
With additional investments being pumped into the economy by the Government and with more and more capital intensive companies opening up, there is a demand for long-term funds. The funds are being supplied but the leverage costs are being bargained upon. The higher these costs are for funds, the greater are the returns to the common man. Surplus cash in the hands of the investors mean some more expenses coming up and this propels further demand in durable consumer goods for example. The economic growth picks up momentum and soon the economy is back on track. Educational institutions open up more outlets and there is a spurt in the rise of students seeking college admissions. This paves the way for more professionals and management executives to staff the new companies coming up.
However, secured principals with Government and banks in no way can do any good for the average investor. Guaranteed principal with minimum base interest rates is the best option available today where passive lines of income can be created for the future.
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