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Types of Investments

Discussion in 'What is Investing? (START HERE)' started by InvestOpen, Jul 4, 2018.

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  1. InvestOpen

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    Types of Investments

    Also known as investment vehicles, there's many types of ways to make an investment.

    Below are the most common types of investments and their definitions:

    Stocks: Stocks are partial ownership in a business that can be public or private. Investors own part of the business proportional to their ownership of their shares to the total outstanding.

    Bonds: One of the oldest financial instruments in the world, bonds represent a contract on debt by a company and an investor. Bonds are contractual obligations by the borrower to repay the debt at a certain point in time as well as any other items throughout the lifetime of the investment that are agreed upon. Bondholders are first in line when companies declare bankruptcy, and can be repaid by the liquidation of assets held by a company.

    Currencies: Currencies provide a medium to store value in a particular country that allow people to transact between unlike goods and services. Each country maintains their own currency, which has its own supply and demand, and is backed by the government. The interrelationship of countries in their economies from trade to war can influence the demand and value for a particular currency.

    Cryptocurrencies: A recent development, cryptocurrencies are unregulated mediums of exchange in a decentralized (no central controlling body) electronic ledger have a regular known method of supply. These coins, and their derivative products, can be assigned a value and traded on open exchanges. Unlike currencies, cryptocurrencies value rely entirely on market participants and are not backed by governments.

    Derivatives: Derivative products are contracts whose values are derived from a secondary asset. These products include options, contract for difference, futures, as well as others.

    Real Estate: Probably the most well-known, real estate are investments in real property or land. These investments can take the form of residential, commercial, or industrial usage depending on zoning and permitting.

    Hard Assets: Also known as tangible assets, hard assets cover anything physical item that can be bought and sold for profits. These include collectibles, paintings, antiques, and others.

    Businesses: If you’ve ever started your own business then you have invested. Investing in a business (outside of stock exchanges) simply involves providing money, goods or services to a company to generate future gains.

    Commodities: Commodities are input products into a manufacturing or business process that is then converted into a product for use or sale. Metals including gold and silver, fuels such as oil and gas, industrial products such as lumber and resin all fall into the category of commodities.

    Futures: Similar to options contracts, futures contracts provide a contract to buy or sell an underlying asset at a given price. Unlike options contracts, which provide the right to do so, futures contracts require an obligation for the transaction to execute.

    Mutual Funds: Mutual funds are pools of money that are managed by an assigned group of individuals or managers using a particular strategy. While mutual funds are only available at the end of each day, exchange traded funds are traded like stocks through a trading session.

    Retirement Accounts: The most common and well-known investment accounts are retirement accounts, which include 401K, IRA, Pensions, as well as others. These accounts are specifically designed to assist individuals or groups in investing and saving for retirement.

    Statistical & Skilled Betting: Unlike gambling, which is defined by putting money towards a transaction that has negative expected value, statistical and skilled betting makes use of statistics and/or skills in order to create an edge and positive expected value from transactions.

    Bank Products: Banking products range from low interest checking and savings accounts, to certificates of deposits, as well as a wide variety of other instruments. At an institutional level, banks may offer customized investment products.

    These are the most common, but there's many other investment opportunities out there.

    < Investment tax and regulations | Making Your First Investment >

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