Investing 101: Different Types of Investments

Now, let’s continue with our investing 101!

Investment concept

What are the different types of investments?

There are different types of investments you can get involved in. Here are some of them:

1.       Stocks
This is one of the most known types of investment.

If you buy shares of stocks, it will give you the chance to be a part of the company’s investment through the increases in the stock prices and dividends that the company may declare. You will then become a shareholder of the company and will give you the right to have claim on the company’s assets in the event of liquidation. But you will not own any assets.

2.       Bonds
These are debt instruments.

You, as an investor, will be loaning money to a company or agency for periodic interest payments and the return of the bond’s face amount once the bond matures. Bonds can be attained from corporations, the federal government, as well as a lot of states, municipalities and government agencies.

3.       ETFs
These are exchange-traded funds, and they share a lot of aspects with mutual funds, which will be discussed a little bit later.

ETFs are traded on the stock exchange on trading day, same as shares of stock. But unlike mutual funds which obtain their value at the end of each trading day, ETFs obtain value constantly during times the markets are open.

A number of ETFs trail passive market indexes including the S&P 500, the Barclay’s Aggregate Bond Index, and the Russell 2000 index of small stocks.

4.       Real Estate
This kind of investment is often characterized through the ownership of residential or commercial properties and then renting them out to other people. Purchasing such properties and then quickly improving and reselling it to gain profits are also a way of characterizing real estate investment.

This investment can be made by means of purchasing, leasing, or other ways of acquiring real estate properties. Real estate investment trusts (REITs) collect investors’ money and use that to buy properties. Mutual Funds and ETFs sometimes invest in REITs too.

5.       Mutual Funds
This investment is a shared investment vehicle which is managed by an investment manager.

The investment manager is the one responsible for allowing or preventing you and other investors from investing your money in stocks, bonds or other investment vehicles. They are valued at the end of the trading day. Also, any transactions of buying or selling shares are nullified once the market closes.

Investment written on paper inside a bottle with coins

With the next 2 type of investment, you will have to meet a certain amount of income and net worth requirements by being an accredited investor.

6.       Hedge Funds
You can invest almost anywhere and may endure better than conventional investment vehicles in times that the market becomes turbulent.

7.       Private Equity
This investment gives the companies the right to raise capital without needing to go public. There are existing private real estate funds that provide investors with a choice of shares in a pool of properties.

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