What are the Different Types of Investments?

When it comes to investing, there are so many choices. What type of investment should you choose? There are so many different types of investments to choose from. But which one is right for you? You might feel overwhelmed, but don’t worry – there are many logical, smart, and safe ways to invest your money.

 
If you have cash that you’d like to put to good use, you’re in the right place. We’ll provide the basics about investing and how to get started. Once you understand the different types of investments, you’ll be ready to make an informed decision that suits your personal financial goals and risks.

What is Investing?

Investing is the purchase of a financial asset, such as stocks, real estate, or bonds with the intent to earn a profit. Investment can also mean “to put to use.” So investing can also mean putting your money to work.
 
Investment can also refer to saving money in order to provide resources for the future. There are many different types of investment vehicles available. It’s possible to invest in many different ways, from stocks to real estate to bonds.
 
Some investments are riskier than others. Your goal when investing is to seek out the ones that provide the highest expected returns for the level of risk you’re willing to take.

What is an investment?

Investing is the purchase of a financial asset, such as stocks, real estate, or bonds with the intent to earn a profit. Investment can also mean “to put to use.” So investing can also mean putting your money to work.
 
Investment can also refer to saving money in order to provide resources for the future. There are many different types of investment vehicles available. It’s possible to invest in many different ways, from stocks to real estate to bonds.
 
Some investments are riskier than others. Your goal when investing is to seek out the ones that provide the highest expected returns for the level of risk you’re willing to take.

#1. Stocks

Stocks are pieces of ownership in a company that are traded on an exchange, usually the stock market. When you purchase stocks, you are buying a fraction of ownership in the company.
 
The value of stocks depends on market demand and supply, which means they’re highly volatile. Generally, stocks are more risky than bonds and real estate, but offer higher potential returns.
 
There are two types of stocks: common stocks and preferred stocks. Common stocks are bought by the general public. Preferred stocks are generally given to investors, who then have the right to buy a percentage of the company at a later date.

#2. Bonds

Bonds are loans given by a government or corporation to investors in exchange for a set amount of interest, generally at a fixed rate for a specific time. Bonds are less risky than stocks.
 
Some bonds are government-issued, while others are corporate issued. Because bonds are backed by the government or a corporation, they are less risky than stocks, but generally don’t offer as much return.

#3. Mutual Funds

Mutual Funds are pools of money invested in many different asset classes, such as stocks, bonds, real estate, commodities, and more, all managed by a professional investment manager.
 
There are both fixed income (bonds) and equity (stocks) mutual funds. Mutual funds are similar to using a continuous investing service like Acorns or Betterment, where you simply fund your account with cash and/or investment funds available in your account and have it automatically rebalanced as needed.

#4. Exchange Traded Funds (ETFs)

Unlike mutual funds, which hold hundreds or thousands of different assets, ETFs hold just one asset, such as stocks or bonds.
 
They trade like stocks on an exchange, which means they can be bought and sold throughout the day like a common stock. ETFs are riskier than mutual funds, but offer less management fees.

#5. Real Estate Investment Trust (REIT)

Real estate investment trusts (REITs) are companies that own and manage real estate companies. REITs invest in real estate companies and own the actual properties, giving investors the potential of steady cash flow.

Conclusion

There are many different types of investments to choose from. Stocks are riskier, but offer more potential return. Bonds are less risky, but offer lower returns. Mutual funds are a combination of both and offer the best of both worlds. Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) are less risky than stocks, but offer less potential return.

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