Tucker - Best answer for more money: immediate cash from safe investments

Copyright 1995 by
George Mason University Press

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Fairfax, VA 22030

Distributed by arrangement with
University Publishing Associates

4720 Boston Way

Lanham, Md. 20706

3 Henrietta Street

London, WC2E 8LU England

All rights reserved

Printed in the United States of America

British Cataloging in Publication Infonnation Available

Library of Congress Cataloging-in-Publication Data

Tucker, James F.

Immediate cash from safe investments / James F. Tucker.

p. cm.

1. Investments. 2. Finance, Personal. I. Title.

HG4521.T83 1995 332.6--dc20 95- 13495 CIP

ISBN 0-913969-75-3 (pbk: alk:paper)

The paper used in this publication meets the minimum requirements of American National Standard for Information SciencesPermanence of Paper for Printed Library Materials, ANSI Z39.481984

To

Mary Rives and Bob Black as well as Other readers of my previous books

Other Books by James F. Tucker

Essentials of Economics (1975, Prentice-Hall)

Current Economic Issues and Problems (1976, Houghton Mifflin)

Anatomy of High-Earning Minority Banks, 1971-1975

(1978, American Bankers Association)

Personal Money Management: A Guide to the Familys Financial Affairs

(1985, Howard University Press)

Buying Treasury Securities at Federal Reserve Banks

(1987, Federal Reserve Bank of Richmond)

Managing Your Own Money: A Financial Guide for the Average Wage Earner (1988, Dembner Books)

Tables, Exhibits, and Figures

Exhibit 11. IncomeSavingInvesting

Figure 11. Point Model for Investing Process

Figure 12. Rate of Return/Risk Relationship for Selected Financial Investments

Exhibit 21. Fed Drops Discount Rate to 5.5%

Exhibit 51. Securities Industry Organizations with Arbitration Facilities

Table 51. Schedule of Fees

Exhibit 61. How Your Purchase Price of a Bond Changes Your Annual Yield

Table 61. Bond Ratings Using Standard and Poors and Moodys Rating Codes

Table 62. High Yield Bond Default Calculations, 19771988

Exhibit 71. General Pattern of Treasury Note and Bond Financing by Month

Exhibit 72. Tender for Treasury Bond

Exhibit 73. Formulas for Yields on Notes and Bonds

Exhibit 74. Treasury Issues

Exhibit 75. The Richmond TimesDispatch Article

Table 101. Comparison of MMMF Assets (June 1986 in Billions)

Table 111. Sources of Income for Persons Age 65 and Over

Table 112. Age for Full Social Security Benefits

Having experienced one of the most prolonged economic downturns during the early 1990s, and having been warned to brace for an indefinite economic future during the remainder of the 1990s, more Americans are searching for additional sources of income, as well as the kind of income that is less likely to fluctuate widely with changes in the economy. These people realize that holding a second job or having both spouses employed is not the answer. This leaves successful investing as the most appropriate and most reliable means for producing the additional money needed to offset the ever-rising expenses in most households.

Put in the simplest of language, this book is designed to help people to get additional money by utilizing the money that they already have. The discussion should aid persons interested in a basic knowledge of investing infinancial instruments and is intended to provide guidance on how to invest in these instruments to satisfy the goals of the household.

Why should people buy this book when they can get similar information from financial columns in the newspapers? Two reasons come to mind immediately. One is that a column in a newspaper is necessarily restricted in the amount of space that it can devote to a particular topic, whereas, this book has no such limitation. Another is that a book is a more permanent source of reference than a newspaper column or a magazine article. Other advantages offered by this book include detailed explanations of every topic, timely illustrations, and definitions of key terms and concepts associated with investments.

While it is recognized that a vast array of investments are available to individuals today, the information and guidance offered by this book are limited to the more common financial instruments. There are perhaps instances in which an investment in precious metals or more sophisticated financial instruments may be more profitable. However, the purpose of this book is to serve those individuals whose income from investments may be crucial to their standard of living.

I am deeply grateful for all of the various experiences which enabled me to develop the various topics discussed in this book. I am also grateful for the patience shown by my loving wife, Caroline, in typing and otherwise preparing this manuscript for publication.

James F. Tucker

Richmond, Virginia

Key Points Discussed

... Who Should be investing

... Sources of Savings

... Putting Your Cash to Work

... Doing Your Homework

... working a second job

This deprives you of living a full and normal life, in that you are not able to do a lot of things that you want to do and should do. You will have little or no time for yourself or your family.

... getting a loan

Remember, except for interest on your home mortgage, interest on loans are no longer tax deductible. Borrowing is okay for emergencies; otherwise, why pay a higher interest rate to use someone elses savings than the rate of interest that you are getting for the use of your savings.

... hitting the lottery

This is more than a hit or miss; its mostly a miss. Actually, you have two chances of getting more money from this sourcevery slim and none.

... receiving a donation of some sort; maybe a gift

Dont hold your breath on this one. Itll never happen.

... robbing a bank

Oh, no! This is definitely not the best answer. Its difficult to even describe all of the potential problems associated with this answer.

This leaves investing as your best bet for getting more cash immediately. According to Websters Ninth New Collegiate Dictionary, the word invest means to commit (money) in order to earn a financial return. In this book, we are defining invest as simply, the act of buying a financial instrument for the purpose of earning a financial return. Many people often talk about the need to invest, but they frequently fail to do so while claiming that they know nothing about investing. Still others know something about investing, but not enough to have confidence in their investment decisions. Most of these people read the financial columns in the newspaper, and some even subscribe to magazines that specialize in providing information on investing. However, this group of people continues to procrastinate on investing beyond a passbook savings account, and they inevitably wind up saying either, Its really too early for me to think seriously about investing. or Its too late for me to think about investing. This, in turn raises the questions, Who should invest, and How can a person invest with confidence? Before any attempt is made to answer these questions, lets review the following descriptions of five actual situations of three individuals and two families.