Familiarize yourself with the benefits listed below and the examples of investments that are capable of producing them.
INCOME
- Interest:
A fixed percentage of principal, paid on a periodic basis, such as monthly or semi-annually. Example: CDs; government, corporate, or municipal bonds.
- Dividends:
A distribution of corporate earnings in the form of cash or stock. Example: Corporate stock such as P&G stock, which hypothetically pays $1.40 per share in quarterly dividends.
GROWTH
- Appreciation/Capital Gains:
An increase in the value of an investment over its purchase price, realized when the investment is sold. Example: Corporate stock or mutual funds.
- Compound Interest:
The reinvestment of interest used to purchase more principal amounts of an investment. Example: CDs with interest reinvested or dividend accumulations and reinvestment.
