Types of Investments
Date Published: Feb 2, 2023
It can be an intimidating world, the world of investing;
you step out your door thinking you can conquer Wall Street, the skies are clear, wind is favorable, and then a meteor of investing comes out of nowhere and smacks you in the face. Don’t worry! We are here to help you dodge that meteor.
There are countless ways out there for you to invest your money in order to make more money, but in this discussion we are going to highlight some of the more basic methods of investing.
Something you buy with the goal of making money on it.
- Stocks: When you buy stock in a company you are basically buying a piece of that company called a share, which represents ownership share in a company. An investor’s main goal with stocks is to purchase stocks in companies that they
think will go up in value.
If a company goes up in value, investors can participate in the success of that company through increases in the stock’s price. When this happens, investors can sell the stock for more than what they paid for it, allowing them to make a profit.
In short, stocks represent ownership share in a company, and companies issue stock as a way to raise money, grow, and allow people to invest in their business. Stocks can lead to high rewards, but at the same time great risks. So, if you are going to invest in stocks make sure to do your research, and consider getting in touch with a stockbroker to help you manage the risks associated with investing in stocks.
- Mutual Fund: Mutual Funds are one of the more popular choices among investors because they usually offer some pretty cool features, such as affordability and professional management. An investor can invest $1,000 in a mutual fund
and diversify it into a large variety of stocks that are contained in a mutual fund’s portfolio. Mutual funds are managed by an investment manager, and each share represents an investor’s part ownership in the fund and the money the
To put it more simply, mutual funds are like gift baskets. Each basket has various types of items in it such as soap which represent stocks, candy which will represent bonds, and let’s say perfume, which will represent cash. This basket represents one mutual fund portfolio. Mutual funds do have greater costs and selling a mutual fund can result in a gain or loss, but they are simple to understand and easy to use.
- Entrepreneurship: Because it requires more than money, this is definitely one of the more difficult types of investments to make. However, putting money into starting and running a business is an investment with large potential returns. Entrepreneurs can make great personal fortunes by creating a product or service that people want to buy. Jeff Bezos, for example, founded Amazon in 1994 in his garage and today he is one of the richest people on the planet.
- Real Estate: You can make some pretty decent money buying and investing in commercial or residential properties. You can also buy shares in what is called a Real Estate Investment Trust or REIT, which is like buying stock in a company that owns income-producing real estate. Stockholders of a REIT can earn a share of the money a REIT makes through a real estate investment. You don’t even have to go out and buy property.
- Precious Objects and Collectibles: This may at times seem more like a hobby than an investment, but if items like sports memorabilia or gold is bought with the goal of reselling them to make more money, then they are an investment. Due to required upkeep and at times storage costs, you may see reduction in eventual profits.
This is basically your chance to be the bank.
- Bonds: An investment type with a low risk, but lower return on investment, bonds are where investors loan money to a business or organization that agrees to pay you back periodically over time with interest.
- Savings Accounts: That is right, if you have just a regular savings account you can rightfully call yourself an investor, because you are lending money to a financial institution. The return is pretty low, but there is practically zero risk because of the Federal Deposit Insurance Corporation or FDIC.
Investment forms that can easily be turned into cash, Cash Equivalents provide a stable, but low rate of return and are mainly for short-term investing. They won’t help you much though if you plan to buy a private jet one day.
- Certificate of Deposit: Whether you are saving for your college tuition or getting your nest egg (money saved for the future) up and running, a Certificate of Deposit or CD, is the perfect savings tool for the future. CD’s allow you to earn higher rates of interest by leaving a certain amount of funds on deposit for a given period of time or CD term.
- Money Market Funds: While returns on Money Market funds are smaller than other investment options, you gain an advantage of a higher rate with little to no risk. They are also more liquid than other investments, so you can write checks out of money market accounts, like you would with a checking account.
Invest With Confidence
As you now know, there are many good ways to start your investment journey, and deciding which one is for you is all part of the fun. So, do your in-depth research, contact an advisor if you feel you need some extra guidance, and don’t be afraid to start small.
If you find yourself having questions, we would love to meet with you. Don’t hesitate to reach out to our Call Center at 989-249-8200 to learn of investment help options. We look forward to being here for you in any way we can to help you reach for the stars of the investment universe.