Types of investments
TLDR: There are several different types of investments available; they vary in terms of profit potential and the length at which you must hold them. Some of the most popular investment options include mutual funds, bonds, stocks, commodities, cryptocurrencies, and more. You can contact a financial advisor to help you set up a solid investment plan.
Achieving financial freedom is the dream of virtually everyone on the face of the planet. However, not everyone is knowledgeable about all of the opportunities available to them relating to investments that can help grow their wealth portfolio all-around. Investing is one of the primary ways that people build long-lasting wealth, and if you want to obtain true financial freedom, you will have to learn the basics of investing.
Before placing a dime of your hard-earned money into any investment, you need to become educated about the smartest investment options available. Below, you’ll find a comprehensive guide to all of the top investments of 2020 and how you can use them to create the ideal life you’ve always had for yourself.
Different types of investments
As you probably know, there are many types of investments available for you to choose from. All of them have different metrics as it relates to the desired investment risk, profit outlook, longevity, profitability, and more. The good news is that regardless of what investment objectives you have, there are solutions for you.
Continue reading to find out more about the top 10 investment options currently available:
- Bonds- bonds are essentially loans provided to entities by independent investors who agree to hold the bonds for a certain period, often referred to as maturity. Once your bond matures, you will receive your principal amount back and a predetermined amount of interest that you agreed to when you bought the bond.
- Stocks- stocks give you ownership in a publicly-traded company; you only earn if the stock price goes up from the original price it was at when you bought it.
- Mutual Funds- mutual funds combine your money with a large pool of other investors, which is then distributed into investments across mutual funds and small companies.
- Certificates of Deposit- Certificates of deposits require you to pay a bank a sum of money for a predetermined amount of time. Once the time is up, you will get back your principal in addition to a predetermined amount of interest.
- Exchange-traded funds- ETFs are a lot like mutual funds; however, instead of being bought through a private fund company, they are purchased and traded publicly on the stock market.
- Annuities- Annuities are essentially contracts bought from insurance companies that pay out small payments periodically.
- Options- Options are like buying stock; however, you can trade or sell them at any price. There are two main option types: put options and call options; put options allow you to sell stocks at any time while call options will enable you to buy stock at any time.
- Retirement Plans- Retirement plans are often offered by employers. Retirement plans are not so much a type of investment as so much they are an investment vehicle. Through a retirement plan, you can invest in several strategies such as IRAs, stocks, 401(k)s, and more. With a retirement account, you only pay taxes on the money when you withdraw it.
- Commodities- Commodities are physical items you can buy and hold; these include gold, silver, wheat, coal, and oil. The only risk you run with commodities is that they will drop in price significantly at a rapid rate.
- Cryptocurrencies- >cryptocurrencies are a reasonably new investment option that gives you the ability to put money into several different virtual currencies. These currencies can be sold or traded on cryptocurrency exchanges and are not backed by any governmental institution.
All of these different investment options give you the ability to grow your money using strategic plans tailored to your situation.
Choosing the right investment for you
Choosing the right investment for you will depend on several different factors. The amount of return you want to see in a specified time will play a significant role in deciding what investment is best for you. The amount of risk you want to take with your investment will also play a large part in choosing the right one for your desired results.
If you are having trouble figuring out what investment option is best for your needs, consider speaking with a financial advisor who can assist you in coming up with a solid investment plan. Remember, any profit that you make as a result of your investments will be subject to taxation, so you should hire a tax professional to assist you.
People Also Ask
What are the five types of investments?
The five main types of investments are exchange-traded funds, options, stocks, mutual funds, index funds, and bonds.
What are the best type of investments?
The best investment options for 2020 are treasury securities, money market accounts, municipal bond funds, and government bond funds.
What is the safest investment with the highest return?
The safest investments are typically treasuries, corporate bonds, certificate of deposit, high-yield savings account, municipal bonds, and more.
You can use this article as a starting point from which you begin making smart decisions about the future investments you’ll make. By taking the time to read through this entire write-up, you will be able to create an actionable investment strategy that will help you reach your ultimate financial goals.