Our content may include links to products from our partners
Did you learn investment at your school?
Well, probably it didn’t happen.
Investment to most is a completely new jargon in a list of their vocabulary. Learning the ins and the outs of investment is a new language that on the surface seem quite difficult to understand.
Investment options like stocks, bonds, mutual funds or other investment assets like the structures, entities, the dollar cost averaging really confuse most of the investors who are just trying to navigate the investment world.
Investment itself is a whole new topic and therefore, to help you along the journey towards investment, there are some useful links that you will find to give you a better scope of what a sound investment really is, expand your knowledge about investment mechanisms, as well, help you understand common types of investments that you are likely to encounter in your life.
Types Of Investments
However, once you have gotten the investment channels right and have understood, then working your way out becomes very easy.
To understand in a better version of what investment really is.
You’ll need to familiarize yourself with some certain terms that will be listed below. The terms actually represent actual paraphernalia that you are going to be invested in.
In its simplest form of definition, mutual funds are investment strategies that allow you to pool up to your money together with other investors towards a common goal. It is one of the common ways to own stocks, bonds or other securities that may be difficult to recreate on an individual’s own perspective.
Good For Retirement
For most of the investors, they would prefer creating wealth in shares of a company through mutual funds held in their 401(k) or the Roth IRA.
The good benefit of funds is that you can invest in them through your retirement plan or buy them directly through the brokerage account. These funds offer many benefits to the investor and in specific, the young starters mastering what investment really is.
If you think about diversifying your investment, then mutual funds are the best, they are easy to use, understand and invest in. however, just like many other investment items, many funds have serious drawbacks, such as hidden fees, lack of liquidity, high sales charges among other drawbacks.
This is perhaps more common to many investors, also known as shares or equity. What stocks normally are an equity investment that represents part ownership in a corporation. As a result, it entitles you to part of that corporation’s earnings as well as assets.
Purchasing of a company’s stocks give you the right to a shareholder in that company. And as an owner, you have the right to vote in a shareholders’ meeting. Thus at the end of the financial period, you will get dividends which are part of the profit.
Government securities are a lot more stable.
Compared to stocks, which are known to be more volatile (they change overtime on a daily basis depending on the economic times) and thus it becomes a gambling game. Buying a stock doesn’t guarantee you of anything. In fact, many stocks do not pay dividends. Therefore, you are only left with one option in case you want to increase your gain which is waiting for the stock to gain in value which may not happen at all.
Investing in stock can pay relatively higher returns compared to bonds and other securities. However, there is a limit to the return’s potential. In the same case, you must be conscious about losing some or all of your investment.
Basically, bonds are a type of investment that results in an investor lending money to the bond issue, in exchange for interest payments.
Fixed-income security is the general category where bonds are usually classified. As an investor, purchasing a bond means lending your money to a company. In return, the company agrees to give you back your money and on top, interest.
Bonds, for those who regularly follow the income investing philosophy form a very integral investment. A guarantee is none of your concern. Your safety is a guarantee with the bonds. Also, they are stable in as much as fluctuation in interest rates is concerned.
However, because bonds are not like the other investments, they come with fewer risks and thus this means a low rate of return, generally lower than other securities. Getting more information on bonds will help you know what to expect when trading
Hedge funds are another investment item. They are so important since they are specialized in a manner to attract managers and institutions, pensions as well as other wealthy individuals to their basket of benefits.
Basically, hedge funds are similar to mutual funds, only with small differences in that, no board regulates them. When it comes to the level of risk usually associated with the hedge funds, mutual funds are a lot safer. Their assets can go a long way to include a broader array of investment. Thus making them even more vulnerable to risks.
More often than not, hedge funds use borrowed money to make an investment. Nonetheless, hedge funds share the features that present both opportunity and risk. What normally happens with these funds is that the portfolio managers typically take short securities position and are willing to bet their money against falling prices and in the long run, they get to benefit from the rising valuation as MarketWatch explains.
Real Estate presents a unique investment channel through which you can gain a higher return on investment. According to recent statistics by the National Association of Realtors, 85% of the major metro areas saw an increase. Thus in property investment, anything you buy, rent or resell is an ownership investment.
When it comes to property investment, an owner may gain in two ways. First, the rent which tenants usually pay. And secondly, the gain in property value over time, otherwise-capital gains.
And although real estate or property investment presents a unique chance of making greater returns, buying and owning real estate are two different languages and there are a lot more complications than what seems on the surface. It is very different from the stocks, bonds and the rest.
In property investment, withdrawing from your investment becomes a lot more difficult.
Thus this kind of investment is said to be liquid. Getting the money that we need will force us to sell the property or alternatively increase the mortgage on the property. However, it may seem easy but again, it is not. Even if it would be, additional costs may apply such as the property valuation costs as well as real estate agent fees.
Property Investment Characteristics
If you want to invest in real estate, then you may have settled your thought on the long-term returns. In the short term, there may be little to no profit given that there are some expenses that you may want to take care of such as the mortgage, the insurance and such. Therefore, people in property investment want to benefit from profit as the prices rise.
To make a nice investment in a property, it is advisable settling on the thought of having your own property. Convincing lenders is much easier if you have something of your own. Some of the property investment lenders have lower limits when it comes to the properties to invest in. basically, for home loans what most of the lenders [mortgage] look for is what the loaned can afford to repay when borrowing for an investment property.
Property investment offers a wide range and diversification when it comes to investments. You can choose to invest in managed funds that buy and sells commercial properties. Normally, the funds own rental building as well as commercial buildings, factories and shopping centers or other funds that own the property. The investors make money when the funds receive rent or make a profit through their many sales.
By the time the fund is selling, another way investors would raise a profit is through the capital gain. Therefore, in property investment, it may be difficult to invest. Once your course is well established, then it makes a good investment platform.
Generally, commodity investment is another common type of investment that as an investor you may want to consider. This investment involves investing in some resources that affect the economy at large such as oil, beef, coffee and such. As the MarketWatch explains, to be considered in the loop, the contract used in buying these goods is called the Future Contracts which you have to fill out through a National Future Association Broker.
Other than that, you may want to consider other investments such as the forex and gold. Their futures as well as options investments which also do have a nice return.