Investing is a necessity for everyone, regardless of age or income. Even if you’re not saving for retirement, you can still invest your money and grow your wealth. From stocks and bonds to real estate, exchange traded fund, there are many different ways to invest in order to create more money and provide some stability.
Here are 27 types of investments that can help you build a stable financial future with little effort.
Stocks are considered a type of equity investment. They represent a share of ownership in a company, and they can be bought and sold on the stock exchange.
While there are many different types of stocks, including penny stocks and blue chips, the most common type is an index fund.
Index funds track a specific index such as the S&P 500 or the Dow Jones Industrial Average. The more you invest in stocks, the higher your risk level will be because you’re putting your money into something that can potentially go up or down over time.
Bonds are also considered an equity investment because they represent ownership in a company or other organization making them debt instruments as well.
Bonds are IOUs that pay interest over time, and they’re issued by governments, companies, or even individuals to raise money for projects or to pay off debts such as credit cards or student loans.
Corporate bonds are typically riskier than government bonds because the company issuing them can go bankrupt and not pay off the bond.
3. Mutual Funds
Mutual funds are a type of investment that pools money from multiple investors to buy stocks, bonds, or other assets. T
hey’re managed by a fund manager who decides which assets to buy and sell and when to buy or sell them. Mutual funds are used by many investors because they offer professional management of your portfolio, as well as diversification.
While they can be managed by an investment company such as Vanguard or Fidelity, they’re also available through brokerage firms such as Charles Schwab or Fidelity, where you can manage your own portfolio.
4. Real Estate
Real estate is another type of equity investment that can provide an income flow over time in addition to capital appreciation if it’s held long enough.
You can invest directly in real estate yourself or through a mutual fund that builds portfolios based on real estate investments and wait for returns from your real estate investments.
Bonds are debt instruments that are issued by corporations, municipalities, and governments. They’re bought by investors who want to earn a return on their investment without taking as much risk as they would with stocks.
Bonds are considered safer investments because they’re backed by the issuer and pay a fixed rate of interest until the bond matures. The issuer will then pay back the principal amount to the investor when it matures.
6. Money Market Accounts
Money market accounts offer investors a safe place to park their money and earn interest on it while still having easy access to it if needed.
They’re insured up to $250,000 per depositor per institution by the FDIC (Federal Deposit Insurance Corporation). Interest rates vary depending on the bank or credit union you choose, but they tend to be higher than savings accounts because of the added risk of your money being tied up for longer periods of time in case you need it.
Money market accounts are also FDIC-insured and can be held at banks or credit unions in addition to brokerage firms such as Charles Schwab or Fidelity.
7. Certificates of Deposit (CDs)
Certificates of deposit are a popular choice for investors who want to earn interest on their money but don’t want to tie up their money for long periods of time.
CDs pay higher interest rates than savings accounts or money market accounts, but you can only withdraw your money at the end of the term — typically one to five years — without paying an early withdrawal penalty.
CDs are insured by the FDIC up to $250,000 per depositor per institution.
8. Individual Stocks and Bonds
Individual stocks and bonds are considered riskier investments than other types of securities because they’re not guaranteed by the issuer like bonds are.
However, if you pick a stock or bond that does well, you can earn a lot more than you would with other investments over time. Investing in individual stocks and bonds is best left to people who have a lot of experience in investing, as it’s easy to lose all your investment if you pick poorly.
You can buy individual stocks and bonds through brokerage firms such as Charles Schwab or Fidelity or through mutual funds that invest in them such as Vanguard or TIAA-CREF Mutual Funds.
Investing in businesses is another way to make money over time, but it’s riskier than investing in other types of securities because you have to pick the right company at the right time.
You can buy shares of stock in publicly traded companies such as Apple or Microsoft, but you’ll have to pay attention to the market value of those stocks on a regular basis and be prepared to sell them if they drop too low.
Alternatively, you could buy shares of privately held companies that aren’t listed on public exchanges by joining angel investor groups or venture capital funds that invest in startups.
10. Exchange traded fund (ETF)
An exchange traded fund (ETF) is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.
Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.
ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
Options give you the right to buy or sell something at a certain price within a certain time period. You can use options to hedge risk or to speculate on whether the price of something will go up or down in the future.
Options are risky because their value can change quickly and be worth nothing if you don’t exercise them before they expire. But they can also be very lucrative if you know what you’re doing.
A derivative is a financial contract whose value is based on the performance of an underlying asset, security, or index.
The most common derivatives are futures contracts, forward contracts, options and swaps. A derivative itself is a contract between two parties that specifies conditions under which payments are to be made between the parties.
The assets include stocks, bonds, commodities and currencies. Derivatives can be used for speculation or as insurance against price movements (hedging).
A futures contract is an agreement to buy or sell something at a certain price at a specified time in the future. F
utures are used in agriculture and commodities markets to manage risk associated with price fluctuations by producers and consumers of goods like wheat, corn and coffee beans.
In the stock market, futures are used by companies or investors to hedge against price movements of their shares.
14. Forward Contract
A forward contract is an agreement to buy or sell something at a certain price at a specified time in the future.
Forward contracts can be useful for hedging risk when you don’t want to tie up your money for long periods of time because you might need it in the short term for other investments or expenses.
15. Corporate bond
A corporate bond is a debt security issued by a corporation. Corporate bonds usually pay a fixed rate of interest every six months until maturity, at which point the bondholder receives the face value of the bond.
16. Junk Bond
A junk bond is a high-yield bond that has a credit rating below investment grade. A junk bond has a higher risk of default than other bonds because it is issued by companies with lower credit ratings. The higher yield compensates investors for taking on this risk.
17. Mortgage Bond
A mortgage bond is an investment in which an investor buys certificates that represent fractions of home mortgages or mortgage-backed securities (MBS).
These certificates are sold in tranches, or portions, and investors can choose to invest in different tranches depending on their risk tolerance and their view on the housing market.
18. Preferred Stock
Preferred stock is stock that pays dividends before common stockholders receive any payments and has priority over common stock if the company goes bankrupt and its assets are liquidated to pay creditors.
Preferred shares also have priority over common shares if the company decides to issue new shares to raise money for expansion or other purposes.
19. Real Estate Investment Trust (REIT)
The real estate investment trust (REIT) structure was created by Congress in 1960 as part of the Internal Revenue Code to encourage investments in real estate such as shopping centers, apartment buildings, hospitals, nursing homes and hotels
20. Hedge fund
Hedge funds are private investment pools that are open to wealthy investors. They are not regulated by the SEC, and they can be risky.
Hedge funds typically charge a management fee and a performance fee, which is a percentage of the fund’s profits.
21. Venture Capital
Venture capital is money invested in new companies with the hope of achieving high returns on those investments.
Venture capitalists typically invest in companies that have not yet gone public or have only recently gone public and whose stock is not yet widely traded on stock exchanges like the New York Stock Exchange or NASDAQ.
22. commodity futures
Commodity futures are contracts for the purchase or sale of a specific quantity and grade of a commodity at a future date and at a specified price.
23. Commodity Pool
A commodity pool is an investment vehicle that allows investors to combine their money to buy and sell commodities. The investors in a commodity pool do not have direct control over the assets in the pool, but they share in any profits or losses.
24. Exchange Traded Funds (ETF)
Exchange-traded funds (ETFs) are open-ended mutual funds that trade on stock exchanges like stocks do, allowing investors to buy and sell them throughout the trading day. ETFs often track an index, such as the S&P 500, but they can also track individual stocks or commodities like gold.
Annuities are contracts sold by insurance companies that provide a stream of payments to investors. Annuities can be used to generate income for retirement or as a way to pass money on to heirs.
26. Master Limited Partnerships (MLPs)
MLPs are investment vehicles that own and operate energy infrastructure assets like pipelines, storage facilities, and processing plants.
MLPs have the advantage of paying out most of their profits in the form of distributions to investors, which makes them attractive investments for income-seeking investors.
Master limited partnerships (MLP) is an investment structure that combines elements from corporations and limited partnerships (LPs).
MLPs have the tax advantages of a corporation but are taxed at the partnership level like LPs; this means that they avoid double taxation at both corporate and shareholder levels while still providing shareholders with access to tax-advantaged capital gains treatment on distributions from MLPs they hold in their IRAs or 401(k)s..