Types of Investments: Everything We Need to Know

Investing has been one of the most underrated yet highly beneficial and recommended fields if we are looking for a good income-generating job. Here, all we need to do is to be wise and advance when making financial and investing decisions. The only downfall in this field is that it is full of risks that eventually require us to have the gut and courage to invest whatever happens. However, if we are aware and knowledgeable, I think we are going to do a good job here. Now, to fully understand investing, let us discuss its types. In this way, we can widen the perspectives that can enable us to be wiser and better in making investing movements.

So, let’s start now!

Commodities

First, on the list, we have commodities that include animal products, grain, oil, metals, currencies, and even financial instruments. Here, we trade the said products through commodity futures. These refer to the agreements we make to buy or sell specific quantities of our given commodities at a particular date and specified price. Also, commodities are capable of being used for speculative purposes and hedging risks.

Stocks

Next on the list, we have stocks. These refer to our becoming a fractional owner of a particular company’s stock. Aside from being a fractional owner, we can also be called the company’s shareholders, who are given the right to participate throughout the company’s overall purge towards success and growth. Here, as company shareholders, we are tasked to appreciate the stock price and receive regular dividends out of the profit of our chosen company.

Funds

Third, we have the funds. Funds refer to the pooled instruments we manage or can be managed by the managers of investing. Here, we are enabled to invest in the stocks, preferred shares, bonds, and commodities, etc. of a company of our choice. Aside from that, there are two common fund types which are mutual and exchange-traded funds. First, the mutual funds are not being traded during an exchange but retain a value throughout the trading period. On the other hand, the exchange-traded funds are being traded and valued just like the typical stocks throughout trading. Also, both can track passive indices, as well as be managed by fund leaders and managers.

Bonds

Also called the debt obligations of an entity, including municipalities, government, and corporations, bonds refer to the obligations wherein debts must be paid once we’re included as an entity. Purchasing a bond eventually means that we are held responsible for paying the debt of an entity we chose and receive interest payments periodically. Aside from these, we can also return the face value of our bonds once we have seen them mature.

Options and Derivatives

Next, we have the options and derivatives wherein derivatives refer to the financial instruments gaining their value from other instruments like index and stocks. On the other hand, options refer to the most commonly used derivative that can provide us not only an obligation, but the right to both buy and sell the security under a specific time and price. Usually, derivatives are employing leverages that then transforms it to becoming a high-rewards and high-risk proposition.

Alternative Investments

Also called the catch-all type of investment, including the private equity and hedge funds, alternative funds had never failed in bringing us wonderful investment endeavors. Private equity can help us and companies raise an amount as our capital without undergoing any processes for publicity. On the other hand, the hedge fund is so-called due to its capability to hedge investment bets through proceeding to both short and long stocks or other investments. Above all, both private equity and hedge funds are available to accredit or also called affluent investors. These are the people who have met the requirements for a certain net and income worth.

Investment Trusts

Lastly, we have investment trusts which is also a type of pooled investment. Here, REITs or the Real Estate Investment Trusts are regarded as the category’s most popular type. The process in this type of investment runs from a REIT that invests in commercial property and then pays the regular distributions to the investors from the received rental incomes of the property. Following that, a REIT will then invest and trade on a stock that offers huge advantages to the investors, especially the instant liquidity.

To conclude, lots of investment choices here. Study them carefully to decide which are for you.