If you’re planning to be an investor, you shouldn’t just aim to be one. Instead, you have to make sure that a profitable venture is waiting for you once you start. The first step to achieving the said goal is to become fully knowledgeable about the different investment types. This is where experts come into play. In preparation for meeting with one, here is a primer on some basic investment classes:
Stocks are the simplest type of investment. This is the main reason why it’s prevalent among beginning investors. You may also know this as shares or equities.
Here, you will be buying a portion of a company’s ownership. It comes in two main sub-types: dividend stocks and individual stocks. These two vary according to their risk level and expected returns.
Investing in bonds is similar to being a lender. You lend money to an institution, usually related to finances or the government, and you earn through monthly interest payments.
Returns may not be as big as other investment types since you will only get a part of your investment monthly. The good this is they’re guaranteed. You’ll get your principal after some time.
Mutual funds refer to an investment wherein a financial institution holds the assets, usually cash equivalents, of several investors. The institution then chooses a specific market to invest cash into. Choices include stocks, bonds, equities, derivatives, and more.
Alternatively, you can also look into index funds, which is a passive version of mutual funds. This focuses on major stock markets rather than various investment types.
Cryptocurrencies are one of the most volatile investment types on the list. It’s a rather modern option for investors. This is where digital money-like assets like Bitcoin, Ethereum, and Binance come in.
Investing in crypto runs through a buy-and-sell system. It’s prone to price dips and hikes. It will be your call if you want to keep the coin during the dip or sell them to other aspiring investors.
Commodities are physical investments. You can invest in real estate properties, farms, agricultural products, minerals and metals, and even gas. This type usually comes with ideal price hikes, but more factors can affect commodities. You have to take other aspects like politics, weather, and environment, apart from the regular economic-related matters.
For starters, real estate comes as the best choice. Properties like this don’t depreciate and are more prone to price maintenance than dips.
Savings accounts are offered by banking institutions. This is exactly the account that you apply for if you want to save money in a traditional way.
Now, investing in a savings account will give you monthly returns depending on how much you put in your account. Rates are usually fixed, so the only thing that you have to look for is a high-yield savings offers. Start by looking into online banks for reference.
Keep in mind that profits, as well as risks and possible losses, are present, no matter the investment type you choose. Make more in-depth research about which will fit your budget the most. You should also take factors like your age, source of income, expected return on investment, and likes. A financial advisor may also help. Doing these will help you get better investment results.