Bank savings account interest rate

[Steve]

How concerned are you about the interest rate your bank pays you to keep your money with them? Do you know what your current rate is? Right now, the best rate I have seen is capitalone.com at 1.24% http://www.capitalone.com/directbank...vings-account/ American Express offers 1.30% http://personalsavings.americanexpre...n-account.html What bank do you use and how does their interest rate compare?

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Lawn care business tips

I keep capital in Mutual Funds and select stocks. My mutual funds in the past 12 months are in the 17% ROI. My son and I bought stock in a company out of Washington two months ago that has desighned a solar film for windows that will generate electricity, it is still being worked on by a University in Florida for 3rd party verification, our investment is up 42% as of yesterday.

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Andy
Halifax, Nova Scotia

[Steve]

Andy,

I am guessing the upside to doing that is you get a better return on capital, but is there a downside, especially for the newer lawn care business owners who don't know when they will need to get a hold of the money from month to month, to pay bills?

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Originally Posted by Steve

Andy,

I am guessing the upside to doing that is you get a better return on capital, but is there a downside, especially for the newer lawn care business owners who don't know when they will need to get a hold of the money from month to month, to pay bills?

All of us should put away a percentage for a rainy day, you should have enough capital set aside to carry you for at least three months should something happen, it takes a lot of decipline but the downside is if you do not start now, you probably will not be any further ahead in the future.

The downside to investing is knowledge, you have to educate yourself and it doesn't happen overnight.

[Steve]

Andy,

Do you recommend that emergency fund be in any specific kind of investment? I have watched a few Suze Orman shows where she talks about keeping your emergency fund in a bank account that is easily accessible.

How important is it doing it like that?

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Originally Posted by Steve

Andy,

Do you recommend that emergency fund be in any specific kind of investment? I have watched a few Suze Orman shows where she talks about keeping your emergency fund in a bank account that is easily accessible.

How important is it doing it like that?

Well my personal suggestion is it be in Mutual Funds which you can get through your bank, they can be bought/sold, at least here anytime you wish, they pay a higher return and your investment is spread over many companies, when you speak to an investment officer, keep it in low risk on the capital side, as high as possible income, min 10 years of history which you should review.

I think capital in a bank account is a waste of your money, I base this on my 14+ years banking experience as a VP and I have a number of degrees allowing me to offer investment advice on this side of the border.

Your emergency fund has to be easily accessible in the event of an emergency, bank accounts are a bit too easy.

[Steve]

First off, what is a mutual fund? How does it differ from a stock or a bank account? What makes it give a better return and what is the down side?

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Originally Posted by Steve

First off, what is a mutual fund? How does it differ from a stock or a bank account? What makes it give a better return and what is the down side?

I can only speak for this side of the border however I believe the laws are close.

A mutual fund is a fun that is managed, generally by a high skilled CFA, what happens is the fund receives money from people like you and I which in turn is invested in a group of companies (stocks). Some of these funds can have 50 or more different stocks, if one doesn't do well you don't loose everything as your investment is spread over a group of stocks.

Mutual funds can be investment specific, for example Oil & Gas, it will have investments in many companies however they will all be involved with oil and gas.

Here is a really good overview

A mutual fund lets you invest in a group of stocks or other investments picked by a professional investor. A fund often offers a broader range of investments than you could buy on your own.

How do mutual funds work?
•When you put your money in a mutual fund along with many other people, it creates a large pool of money that can be invested. The company that runs the mutual fund puts a professional in charge of investing the money. This person is the fund manager.
•The fund manager decides where to invest the money and manages it for all of the investors, so you don’t have to decide what to do. The manager also decides when to buy and sell investments for the mutual fund.
•You put money into a mutual fund by buying units of the fund. You can choose a fund that buys the kinds of investments that you’re comfortable with, and that will help you meet your goals. Is the most important thing to keep your money safe? Get regular income? Grow your money? The fund you choose must be right for you.
How do I make money from a mutual fund?
•The price of your units will go up if the investments in the fund do well, and you will make money if you sell. If they are not doing well, the unit price falls. You will lose money if you decide to sell your units when the price has dropped.
•In some cases, the money the fund makes will be distributed to its investors in the from of cash or additional units.
Remember: With mutual funds, you have fewer decisions.
You are putting your money in the hands of a professional. You do this hoping that you will make more money than you could on your own. For some investors, this is not the best choice. It depends on what kind of investor you are.

[Steve]

Very interesting. So maybe the downside to it is that it isn't insured against loss like most bank accounts?

In the U.S. most banks are FDIC insured, so you can't lose your money if the bank fails. I am guessing they have something similar to this in Canada?

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Originally Posted by Steve

Very interesting. So maybe the downside to it is that it isn't insured against loss like most bank accounts?

In the U.S. most banks are FDIC insured, so you can't lose your money if the bank fails. I am guessing they have something similar to this in Canada?

Yes, CDIC, $65,000