Three Types Of Investment

Posted on Feb 1 2016 - 4:48pm by Editorial Staff

You probably know a little about investment already, and may want to find out more about the whole topic. Many people in the modern day have a little extra money floating around their accounts. Finding out the best thing to do with that money can often feel very complicated. Although not exactly simple, investing can give you the opportunity to grow your savings rather than let them burn away. Here, we’ll look at the main types of investing.

Investment 1

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First of all, there are bonds. Bonds fall into the more general category called fixed-income securities. As you get more involved in investing, you’ll find that “bond” is often used to talk about any security which is centred around debt. When you make this kind of purchase, you’ll be investing money in a given entity. That entity will agree to pay you back interest on your investment, and eventually pay back the full amount. The biggest advantage with this kind of investment is the relative safety. If you buy your bonds from a fairly solid company or government, then you’re almost guaranteed to get your investment and then some back. However, the price for this kind of stability is a generally depleted return. This is due to the lowered risk.

Another common investment comes in the form of stocks. These are also known as “equities”, mainly by professional advisors. As opposed to bonds, stocks make you a part owner of the business. This will allow you to vote on certain issues at shareholder’s meetings for your company. Mainly though, you’ll get a share of the company’s profits allocated to the shareholders! You’ll hear these profits often referred to as “dividends”. Stocks have a pretty big disadvantage compared to bonds in that they’re far more volatile. A bond will give the investor a steady, fairly dependable income, whereas the money stocks bring in fluctuates every day. The returns from stocks are generally much higher than those from bonds. However, you’re not guaranteed any kind of return, and can end up losing a lot.

Investment 2

Image source: Wikimedia

Most investments can be grouped together with either bonds or stocks, but there are other options. Alternative investments are another route you can take, though you probably don’t need to worry about them at this stage. These kinds of investments are generally high risk and high profit. They’re also much harder to predict and monitor than the other two categories. Because of this, tackling them requires a bit of specialist knowledge. If you understand the market and can afford the risk, then alternative investments are certainly an option to consider. Never rush into them though. Trying to take on alternative investments with little investing experience can easily bankrupt people.

I hope this post helped you to decide whether investing is right for you. Investing can be exciting and rewarding, but also stressful and nerve-wracking. This article has only really skimmed the surface, so make sure you know enough before making any big decisions! Like any kind of financial decision, the more you know, the better you’ll come out.

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Editorial Staff at I2Mag is a team of subject experts.