Types of investments.
There are very many investment options available in the market. If you are a new investor, you should know the best mix so that you spread your risk around. Investment specialist will tell you that you should never put all your eggs in one basket because you never know how one investment type will do. You are better off diversifying your portfolio for maximum returns.
Stocks are some of the most common investment vehicles in the market. When you buy shares in company stock, it means that you own a piece of that company. Stocks come in a wide variety and take into consideration the size of the company, type of industry, how the company performs during marketing cycles, and their potential for growth whether on a long or short term basis.
A bond is basically a loan made by an investor to an organization in exchange for profit gain from the interest paid by the borrower. The investor will also get repayment of the principal amount at the maturity of the bond.
These come in a wide variety and include mutual funds, exchange-traded funds, and closed-end funds amongst others. Investment funds work by pooling resources from different investors and using them for specific investment strategies. The best thing about them is that they offer diversity, professional management, and different styles and strategies.
Banks offer a safe and convenient way to accumulate your money. Some will offer additional services like helping you manage your savings. There are different types of accounts; savings accounts will pay you interest and allow you to make as many deposits as you feel like. Money market accounts are also deposit accounts with a higher interest rate. Certificates of deposit offer predictable returns and interest rates that are higher than savings accounts. You cannot, however, withdraw your money without a penalty.
An annuity is a contract you get into with an insurance company where the company promises to pay you a specified amount of money over a period of time. You can make a single payment or multiple payments/premiums. Annuities are a great way to save for retirement because they can offer you a stream of income once you retire. The most common types are fixed, variable and indexed annuities which base your returns on your age life expectancy and the prevailing interest rates. Variable annuities allow you to choose your investment vehicle and your return will depend on how the investments perform. Indexed annuities have a characteristic of the fixed and variable annuities and offer a minimum interest rate combined with the rate in the market.
These are contracts that give you, the purchaser, the right but not obligation to buy yourself security, such as exchange-traded funds or stocks within a specific time period and price. They help you manage your risk, although there is a risk in buying and selling of options because you can lose your money.
We have just highlighted some of the most common investment vehicles available for you. Before you decide on the one you want to use, make sure you have a proper understanding of how it works and how you can make money out of it. Consider getting an expert to guide you through the process so that you do not lose your money.