Many Different Options Are Available
In general, the word “investment” refers to somebody putting their money into a project, business, etc., that allows them to gain additional profit on top of their principal amount. There are many types of investments available, ranging from low-risk to high-risk. Today, I have researched some of the most common types of investments for you! Keep in mind, this article is not meant to give advice about how certain investments are better than other investments, nor should any information included in this article be taken as professional financial advice.
Cash
It might not seem obvious, but a cash bank deposit is actually an investment! Cash bank deposits are commonly regarded as being one of the simplest types of investment, virtually always guaranteeing the “investors” that “they’ll get their capital back.” However, cash bank deposits generally yield lower interest compared to some of the other types of investments.
Bonds
A bond is defined as “a debt instrument representing a loan made by an investor to a borrower.” Generally, the borrower would pay back to the investor the money they owe. Bonds very often involve a company or a branch/agency of government, allowing these “groups” to “finance operations, purchases, or other projects.” Bonds are often seen as having higher risk compared to cash bank deposits, but bonds are generally considered to be of lower risk than stocks!
Mutual Funds
According to Investopedia, “most mutual funds have a minimum investment of between $500 and $5,000.” A mutual fund involves multiple investors “pooling” their money together to purchase securities. Mutual funds are generally valued after each trading day, so that means that transactions (i.e. selling or buying mutual funds) typically occur after the closing of the market each day.
Exchange-Traded Funds, commonly known as ETFs
ETFs were introduced in the mid-1990s. ETFs are quite similar to mutual funds; however, they can be traded when the markets are open each day. This is unlike the mutual funds described in the previous section, which are usually traded after the closing of the market each day. ETFs are similar to stocks, in terms of the buy-and-sell behavior.
Stocks
When investors buy stock shares, one could say that they also “participate in a company’s success via increases in the stock’s price and through dividends.” The investors who buy stocks don’t own the assets of the company, but if the company were to go bankrupt, they do possess a claim on the company’s assets.
Other Investments
There are many other types of investments as well! Real estate, commodities, and private equity funds are all investing options. You can learn more about them here in this Investopedia article. Personally, I am not at all an expert in investing; for each individual, it would probably be best for them to decide for themselves how they would manage their capital. Investing could bring profits, but there will always be risks associated with it as well.