Answer to Question #283889 in Financial Math for Riri

Question

Suppose you have savings in the bank that you want to invest in stocks and bonds instead of setting up in a new business.

Write one to two paragraphs discussing what method you can use to make the investment and explain the reasons for your decision.

Answer 1

For anyone with savings in the bank and they want invest instead of starting a business, then the Roth IRA is their best investment method. This is due to the following reasons; firstly, the Roth IRA offers tax advantage. Even though the contributions are post tax, the gains are never taxed as long as they are withdrawn within the regulations.

Secondly, it is liquidity. Since the original investment has already been taxed it can be withdrawn any time without any consequences. Lastly, the advantage of stock and bond investing over starting a business is the passive nature of investing.  That is, starting a business typically requires massive time and energy but investing in stocks allows someone else to do that work.