Читать книгу Mutual Funds For Dummies - Eric Tyson - Страница 15

Lending is a type of investment in which the lender charges the borrower a fee (generally known as interest) until the original loan (typically known as the principal) gets paid back. Familiar lending investments include bank certificates of deposit (CDs), United States (U.S.) Treasury bills, and bonds issued by corporations, such as Chipotle.

In each case, you’re lending your money to an organization — the bank, the federal government, or a company — that pays you an agreed-upon rate of interest. You’re also promised that your principal (the original amount that you loaned) will be returned to you in full on a specific date.

The best thing that can happen with a lending investment is that you’re paid all the interest in addition to your original investment, as promised. Although getting your original investment back with the promised interest won’t make you rich, this result isn’t bad, given that the investment landscape is littered with the carcasses of failed investments that return you nothing — including lunch money loans that you never see repaid!

Lending investments have several drawbacks:

 You may not get everything you were promised. Under extenuating circumstances, promises get broken. When a company goes bankrupt (remember Bear Stearns, Enron, Lehman, Sears, WorldCom, and so on), for example, you can lose all or part of your original investment (from purchased bonds).

 You get what you were promised, but because of the ravages of inflation, your money is simply worth less than you expected it to be worth. Your money has less purchasing power than you thought it would. Suppose that you put $5,000 into an 18-year lending investment that yielded 4 percent. You planned to use it in 18 years to pay for one year of college. Although a year of college cost $5,000 when you invested the money, college costs rose 8 percent a year; so in 18 years when you needed the money, one year of college cost nearly $20,000. But your investment, yielding just 4 percent, would be worth only around $10,100 — nearly 50 percent short of the cost of college because the cost of college rose faster than did the value of your investment.

 You don’t share in the success of the organization to which you lend your money. If the company doubles or triples in size and profits, the growth is good for the company and its owners. As a bondholder (lender), you’re sure to get your interest and principal back, but you don’t reap any of the rewards. If Elon Musk had approached you years ago for money for his then new company Tesla, would you rather have loaned him the money or owned a piece of his company?