Types of Investments
Before you begin investing, it helps to know just what the different types of investments are so you can figure out exactly where you want your money to go.
But, with all of the different options that are out there, it’s easy to see just how there can be a bit of information overload when exploring your options.
But don’t worry about it, because help you out is what this site is all about.
That’s why this page will explore basic types of investments, what each one consists of, and help you determine just where your money will best serve you.
Investing for Dummies: These Are Your Basic Options
You’ve decided that you want to invest your money so that it can begin working for you. Now comes the task of figuring out what kind of investment would be best for your goals. Once you reach that step, know that these are some of the paths you can follow:
- Stocks – Stocks are one of the first ways that many people get started with investing and the concept behind them is fairly simple: When you buy stock you become part owner of that company.
With part ownership of the company, you get part of the profits that are brought in if the value of those stocks rises. This all depends on how many shares of stock, or equity, you purchase and the same rule applies losses; the more stock you hold, the more you stand to lose if value drops.
- Bonds – If you’re familiar with the basic concept of lending money with an interest rate attached, then you have a basic understanding of just how bonds work.
When you buy bonds, you loan money to a business or government and receive your money back, plus interest at the end of the bond’s life.
- Mutual Funds – Mutual funds see you pooling your money together with other investors. With the system, the money is invested in various stocks and mutual bonds by a professional manager.
The idea behind this is that you, as a beginner, can just put your money in the fund and the manager will make all of the decisions about where the money is invested.
Of the different types of investments, this is one of the easiest to get into because it requires a very limited amount of knowledge when it comes to basic investing.
These are the basic types of investments and my suggestion to you, as someone who is just learning about how to invest, is that you learn what I consider to be the important principals of investing before you move in whatever direction you do.
Beyond that, it also helps to know about the considerations for each type of investment.
What Considerations Should I Keep in Mind?
The main thing you want to keep in mind when you think about where to put your money is the risk involved.
Historically speaking, higher risk investments have the potential to reap higher rewards. As far as the types of investments highlighted here are concerned, that means that bonds are the safest bets, stocks are the riskiest, and mutual funds are somewhere in between.
You also want to invest with the mindset of being in this for the long haul, rather than taking your money out soon after it was put in.
As you grow more comfortable with the types of investment accounts and how they work, you will want to diversify the types of investments you put your money in to better your chances of being negatively affected by big changes in your portfolio.
By following these steps as you navigate the different types of investments, you can make sure you have as strong as chance as possible in making your money work for you.
You’ll get the most out of what you invest and always have something set aside for the future.