If you are trying to make the most of your investment portfolio, you’ll want to know more about the different types of investments. Choosing the right one for you depends on your personal goals and risk tolerance. However, a crash course in investment terminology can help you make smarter investment choices.
There are three main investment types: stocks, bonds, and cash equivalents. Each has their own advantages and disadvantages. While stock investing has historically yielded higher returns, it can also be more risky.
Bonds, on the other hand, are a type of fixed-income investment. They are a loan to a company or government that is paid back with interest over a certain period of time. The interest is usually lower than stocks, but the return is higher.
Cash investments are similar to savings accounts. They can be high-interest savings accounts or overnight funds. Investing in these is considered a low-risk investment, but does not generally offer capital growth.
Another type of investment is real estate. Real estate is a popular investment because it can generate income from rents or sales. This type of investment comes with its own risks, such as property taxes and a drop in value.
Other types of investments include currencies. Investing in other currencies is a way to diversify your portfolio, as the value of a currency can fluctuate. It’s also a good way to earn money when the currency increases.
Stocks, or equities, are shares of a publicly traded company. Buying these makes you a part owner of the company. As with any type of investment, the value of these can be affected by events in the market, such as the performance of the economy or political trends.