April 10, 2021

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7 Types of Financial Investment everyone should know

3 min read
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Day after day, our dreams and desires grow like wildfire, and the means of achieving them seems to fade away. Generally, our desires outweigh our needs and our dreams find the road to reality difficult to thread. 

However, by making financial investments, there’s a chance to make our means catch up with our desires to bring our dreams to reality.

What is Financial Investment?

Financial investment is an asset or item that you acquire with the goal of generating income or profit. In other words, it involves the purchase of any mechanism for the purpose of making more money. 

Investing also involves taking a certain level of risk. That is the risk of losing your capital if things go wrong. For instance if you invest in a company that ends up going bankrupt or the item you bought loses its value in the market. 

However, you can well manage and prevent this risk

What are the types of Financial Investments?

Just as there are different investors with different points of interest. Investment also suffices in several ways, each with its own operational technique. The following are some types of investments:

1. Mutual Funds:

This type of investment involves more than one investor. These Investors collectively invest money for the purchase of securities. Mutual funds operate both passively and actively. 

When such investments yield returns, the investors distribute the profits according to the existing agreement between them.

2. Bonds:

A bond is a debt instrument that a borrower acquires in form of a loan from an investor with a fixed amount of interest. A typical bond often involves a corporation, or a government agency, who use them to finance their operations.

Bonds are a major form of investment. They come in varying rates, depending on the agreed fixed rate of interest.

3. Stock:

This is another major investment security that most investors opt for. It involves the purchase of shares from companies or organizations in exchange for considerable returns. In other words, shares of stock are what allows an investor to make a valid claim over the assets of a company. This may occur most especially in the event of liquidation or bankruptcy of such a company.

4. Real Estate:

This type of investment can involve the direct purchase of commercial or residential properties by Investors. It can also involve an indirect purchase, where such investors buy shares in real estate investment trusts (REITs). 

This REITs closely relates to the mutual fund investment that involves a collective purchase by many investors.

5. Exchange-Traded Funds (ETFs):

The Exchange-traded funds (ETFs) as a form of investments data long back and still remains relevant. It is equally similar to the mutual fund’s investment plan, although trading here occurs throughout the day on a stock exchange. 

Consequently, this type of investment represents a mirror that monitors the buy-and-sell behaviour of stocks. 

The ETFs are very popular among investors as a result of their ease of trading and effective coverage. However, their value may change drastically during the course of a trading day.

6. Cash Bank Deposits:

This is one of the simplest, easiest and safest types of investment.it provides investors with the precise knowledge of interest/ROI they will earn and guarantees them capital refunds. 

However, the major downside to this form of investment is that when you earn interest, that is kept in savings account. Such interests hardly get to be

7. Commodities:

These are alternative investments that they refer to as tangible. That is, the purchase of valuables such as  Gold, Silver, crude oil, Precious stones, as well as agricultural products. These items bring profit when their market value increases and the investor gets to sell them out.

Conclusion

The sole purpose of Investment is for generating future income. The above listed are some of the major but not exclusive types of investments available for you to increase your net worth. What are you waiting for? Make a choice today.

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