Types of Investments
Investment in unequivocal terms is taking a certain sum of money aside and to make some use of it that is stable and profitable in the long run. This blog explains 50+ Types of Investments in detail with examples.
The main types of investments that people mostly pursue are Stocks
To buy a portion of stocks of an established system is to or have a share in the company’s management. So in accordance with that one receives his share of the company’s profit depending upon the company’s performance in the month or year.
Most of the companies put a part of their stocks up for sale to initiate start up or to expand their business by getting some capital from the market by selling stocks. When investing in stocks, you’re buying a share of ownership of a company. You’re a shareholder.
There are two types of stock:
The shareholders that have a percentage of ownership of their names also own the right to vote on the issues that affect the running of the company and receive money paid regularly from the profit made.
These shareholders receive their share of the profit that is made, but they do not have the rights to vote in the affairs concerning the running of the company.
The returns and risk for both types of stock investments vary from one to another, depending on factors such as the economy of the country, political conditions, the company's performance on its own and other stock market factors.
When a bond is bought, you’re giving money to a company or government institute. Bonds are given to the buyer for a fixed period in which the interest payments are made to the buyer.
The payable amount depends on the interest rate set up by the issuer of the bond when the bond is issued to them. Fixing a bond rate is called the Coupon rate, and it can be changed as desired. In the end, the seller of the bond has to pay the amount fixed.
In comparison to stocks, bonds are considered a more stable means of investment because they provide a steady income. Because relationships are more stable, their long-term return probably will be less when compared to stocks.
Bonds, however, can sometimes outperform a particular stock’s rate of return because shares are liable to face turbulence.
They are the short-termed investments, Cash equivalents are investment securities that are made for short-term investments, and they have high-quality credits and are malleable.
Cash equivalents are also called "cash and equivalents.” These are the three principal investments. Cash equivalent investments protect your original investment.
Savings accounts: an account that offers a minimal interest rate and limits the number of withdrawals from the reports. Checks are not provided with saving accounts. Money market accounts: an account that offers a more substantial sum of interest than the savings account. These accounts provide users with checks.
Forex Market is another option if you want some quick and high profit. But you must be ready to take the high risk as well.
In the Forex market, your main deal in Currencies, Commodities, and cryptocurrency. You should get considerable knowledge about Forex investment before you invest. You can find better guidance at Walletinvestor.
Certificates of deposit (CDs)
A certificate of deposit (CD) is a savings certificate with a fixed expiration date which is specified at a fixed interest rate. A CD restricts access to the money until the date of expiration is reached.
You can invest in a lot of different things, but many people start with stocks. They’re easy to buy, sell, and understand. They also historically outperform other investment options over the long–term.
A public company can raise money by selling portions of ownership called shares to the public through a stock market.
Buying a share of stock makes you a “shareholder,” and you become a partial owner of that company. The company gets money to grow and you get to own a piece of a company. From railroads to space travel, shoelaces to software, the list of public companies that issue stock is huge!
Stocks are bought and sold. One person is buying a stock that they think will go up in value, while another person is selling that stock because they think it will go down (or they need money).
Stock prices represent the battle between those two thoughts. Who’s right? Who knows? Multiply this by millions of shares of stock being bought and sold by millions of people every day, and you have a stock market.
YOU can’t buy a stock as you go to the store to buy a bag of chips. Only specially licensed people called brokers can trade stocks. When you’re ready to buy or sell a stock, you place an order and the broker executes it for you.
Trading stocks aren’t free—the brokerage usually charges a commission for this service, but it’s worth it if you can make big profits. You may also want to take a look at online trading websites and apps— there are many to choose from, so do your research and pick the one that’s best for you.
BULL VS. BEAR
What is the long-term performance history of the stock market? Throughout the stock market history, the average yearly return for periods of 25 years or longer has been around 9% to 10%.
When stock prices are rising the market is said to be a bull market, and when it’s on a downward trend it’s said to be a bear market. The terms bear and bull are thought to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, whereas a bear will swipe down.
CHOOSING A BROKERAGE
YOU can get brokers working for you by opening a brokerage account. You can’t have your own brokerage account until you reach 18 or older.
But you can have your guardians open one for you, which (as with your savings account) is called a custodial account. You legally own the money in the account, but the custodian has to actually make the trades.
There are lots of brokerages out there, and you need to find one that’s right for you. Here are three important things to keep in mind:
1. Your money is not insured as it is with a savings account. Choose a well-established company you can trust.
2. Trading stocks cost money, so try to choose a brokerage with low fees. The less you pay, the more you keep!
3. Choose a brokerage that lets you purchase partial shares (also called fractional shares). That means you can buy as much or as little of stock as you want—even less than one share. With some stocks trading at hundreds of dollars a share, that can be a good thing!
If you listen to the news, you might hear what sounds like a bowl of alphabet soup: NYSE, NASDAQ, DOW. Listen up, because they’re talking about the financial markets. Stocks and many other types of investments are bought and sold on an exchange. If a stock is available on an exchange, it’s said to be listed there.
What about those other letters you often hear? Like the S&P 500 and the Dow? They are referring to an index. An index is like an imaginary grouping of stocks and can be a good indicator as to whether the market as a whole is going up or down. Two well-known indices are:
S&P 500: It recommends which stocks to buy and sell and also keeps track of the S&P 500. True to its name, it’s based on 500 stocks and is the most commonly used benchmark for the health of the stock market.
DOW: It’s similar to the S&P, except it tracks 30 really big companies.
To be included in this index, a stock must be a leader in its industry and widely held by investors. Watch these indices and get a sense of where the stock market is going overall. It pays to keep an eye on the general state of the market.
CHOOSING YOUR FIRST STOCK
There are literally thousands of stocks to choose from. How do you go about picking your first one? If you want to invest in individual stocks, a good way to start is with companies you know.
What is your favorite beverage? What shoes are you wearing? What snacks do you eat? Any of those businesses could be listed on a stock exchange.
All you have to do is find the company’s stock exchange symbol, and do some research. (Never buy a stock without doing your research.) You might also look at the top ten performing companies over the past few months or years. Pay particular attention to ones that have weathered economic downturns.
Your goal is to find good companies that will go up in value—not the one making the coolest thing. A great company doesn’t equal a great investment. That’s where doing your research as a young investor comes into play.
DO YOUR RESEARCH
There’s a lot to research about each stock. The more experienced investor will want to know details like P/E ratios, 52-week high and low, and market capitalization, but here are some important basics to consider:
Profitability: Is the company making a profit? If not, will it be able to soon?
Growth prospects: Is the company expanding into new markets or hiring more employees?
Management: Do the key executives (aka bosses) have the experience to reach the company’s goals?
Competitive Advantage: Does the company have a special or unique advantage compared to its competitors?
Finally, always remember that past performance is not a guarantee of future results.
PROTIP: There are tons of stock investing games with imaginary money. Try them out and avoid a bunch of rookie mistakes before risking your real cash in the stock market.
HOW DO YOU ACTUALLY MAKE MONEY?
BOUGHT your first stock? Congrats! Time is on your side, so hold on to your stock while it hopefully goes up in value. The key to profiting from an individual stock is to buy low and sell high.
If the stock costs $10 and it goes up to $2 over the course of a year, your investment has risen 20%.
That’s if you were to sell it. If you hold on to it, it may keep rising and may go up another $2 the next year. When you decide to sell your stock, the number of shares times the price you sell them for (minus the brokerage fees) gets deposited into your brokerage account.
Finding undervalued stocks and waiting until everyone else catches on is called value investing. It is a very popular investing style.
It involves researching companies to understand their strengths and any risks they have, and then deciding if the stock price is fair. In many cases, strong but boring companies do not get as much attention from investors. A value investor would see this, buy the stock, and wait for its value to go up.
Occasionally, a company will authorize a splitting of the stock. It will do this to keep the price attractive to new investors and to reward current ones. It can vary, but many stocks will split 2 for 1.
That means for every share you own, you now own two at half the original share price. Hopefully, the stock will rise back to the original price, and you can potentially double your money.
Some companies pay a dividend on their stock. Dividends are a share of the company’s profits that the company gives back to investors.
Dividend payments are usually made once every three months. They can often be fairly substantial—several percentage points of a stock’s price (much more than you’d earn with a savings account).
Dividends are paid per share, so the more shares you own, the more you collect. One more thing: Some financial analysts think dividend-paying stocks tend to do better over the long term. So a company with a stock that pays dividends may be worth an extra look.
Because it spreads out your risk. The price of a single stock can change a lot from day to day. But when you add a whole bunch of stocks together, those swings are usually not as wild—and if they are, the entire market is doing it, too.
When you’re young, you have time for your money to grow and can take more risks and make mistakes, but when you get older you’ll need to protect yourself.
FUN WITH FUNDS
A great way to diversify is to invest in multiple stocks at once using mutual funds and index funds.
A mutual fund is an investment that packages together many types of investments. Some might hold only stocks; others might add bonds, real estate, or precious metals and other commodities to the mix.
An index fund follows the total performance of a group of stocks. For example, SPY is the symbol for an index fund that follows the S&P 500. Both kinds of funds can have a very broad range of stocks or a very narrow one.
There are funds that focus on technology, on socially responsible companies, or even ones that are just made up of stocks that pay dividends.
Some funds are run by people who do a lot of research for you. You often pay a hefty fee for their expertise in the form of a “management fee.”
One thing to remember is that a fund can be great for the past five years and tank the next. Sometimes smart fund managers just turn out to be lucky ones—and luck can turn.
Other funds—especially index funds—are controlled by committees and/or algorithms, which are rules that automatically determine which stocks or bonds will be in the fund. Because there’s no brainiac managing them, index funds often charge lower management fees.
Before you invest in a fund, read the details of the investment offering (called a prospectus). Be careful; some funds charge little or nothing making them a great deal for the beginning investor (assuming they go up!). Others charge hefty fees that can take a serious bite out of your profits.
The great thing about mutual funds and index funds is that they let you “own” a whole bunch of different stocks with every share you buy. That means you achieve instant diversification.
WHERE TO RESEARCH
STOCK WEBSITES: Big stock market websites have news, analyst reports, and historical charts for just about every stock across all the big exchanges. Some examples include Investopedia, Motley Fool, Yahoo! Finance, The Street, and MSN Money.
FINANCIAL PAPERS: Even if you don’t understand all of what they say, financial newspapers like the Wall Street Journal or Barron’s are great ways to learn and figure out what you might want to invest in.
COMPANY QUARTERLY EARNING REPORTS: All publicly listed companies file a report on their earnings and losses at the end of each quarter. Read them before you invest.
YOUR BROKERAGE: Once you have a brokerage account, you’ll have access to tons of information about every stock under the sun.
FRIENDS AND FAMILY: Ask people you know if they invest, what they invest in, and why.
If you buy a stock and it goes down, you don’t have to sell it right away. The same is true if the stock goes up. If you did your research and it’s a solid company, you could try holding on to it and seeing where it goes.
Stocks go up and down all the time—you don’t earn or lose money until you sell the stock or the company goes out of business (yes, it happens). If it is a good quality stock, investors who hold over the long term are more likely to win out in the end.
ADVENTURES IN INVESTING
IT’S important to keep a close watch on your investments—but not too close. Some people love tracking their investments daily. Others get freaked-out at the slightest drop and make silly decisions.
Depending on how long you’re planning to invest, you could review them daily, weekly, monthly, or even every three months for a retirement account you won’t be tapping for 50 years (assuming you don’t make $1 million and retire by age 15).
Keep an eye on the news and markets, in general, to spot risks and opportunities, and enjoy knowing you’ve done the right thing and invested the money for your future.
Have you ever thought of making cash in the privacy of your home? Work as much or as little as you like. Forex trading, or the trading of foreign currencies, allows you to do just that make money at home.
The foreign currency trading market is the least regulated market in the world. Nevertheless, it's also the world's largest financial market.
From the outside, trading in the Forex market may appear to be done without difficulty. Nevertheless, that's not the case, at all. For beginning traders, proper education and training in the basics are of paramount significance.
Trading the way the professionals do it is certainly possible. It's just like any other occupation: It requires knowledge and experience.
Training in this discipline is readily available. You can find formal classroom training. However, online training is also accessible, and it's the kind that many people want these days. Online training allows personal study from home.
Regardless of which method is used, the student will benefit from the training when he or she starts making successful trades. Moreover, it's possible to offset the initial cost of the program.
The courses for those who would like to become professional traders offer education in all of the aspects of trading. You'll have access to the latest software and tools required for successful Forex trading.
The professionals use the best tools available to them, and through their teaching, they'll be able to help you select the best tools for your trading.
For Forex trading, a significant amount of knowledge is required. Not anyone with any business acumen at all would embark upon a new field without the correct training. Financial disaster awaits those who are less than astute. To do well as a trader in the Forex market, a fundamental knowledge of foreign currency exchange is demanded.
Training courses, online or off, offer the student the advantage of using real date and quotes. Also, the student learns skills that would take years to accomplish otherwise.
How to write a business plan is part of the education process, and when combined with the instructor's feedback, provides a good foundation for writing the next scheme.
Successful Forex trading means that the trader can make a lot of money in a short amount of time. To be successful, however, requires training, experience, and patience.
If you are a Forex trader, you have probably heard a whole lot of different trading advice, trading rules, etc. In certainty, there are several general rules when it comes down to trading Forex.
Unfortunately, most traders, especially the newbie traders who are just starting out in the Forex market, will break these rules. Part of the process of education is breaking rules and making mistakes.
In doing so, a trader will ultimately form their personal trading skills, and they’ll develop their set of trading rules and laws. They, in the long run, will bring you to success.
Before you can even start thinking about developing your personal set of Forex trading rules and guidelines, you have to evaluate your knowledge of the industry thoroughly.
Some people prematurely feel that they have acquired all of the necessary knowledge they will ever need to become successful Forex traders. Unfortunately, more often than not, this is not the case.
It always seems to come back to proper and thorough Forex training. The best Forex training involves educating yourself or hiring someone else to educate you on each and every aspect of everything trading Forex entails.
Luckily, there are recommended factors that can help you on your journey to becoming a successful Forex trader.
Here are some general recommendations to help you avoid significant losses in your first stages of trading Forex:
When you are first starting out, decide on the specific amount of money you want to use to begin your initial Forex trading with. This sum of money must be an amount you are willing to risk losing.
When trading, you should never use any more than 10% of your initial deposit.
Never used borrowed or loaned money for trading Forex, always use your means.
Never make too many transactions at the same time. Doing so will increase your possibilities of making mistakes.
Never work against the general trend. Always analyze at least two sources of information (i.e. news and graphic analysis) Also, always be sure to evaluate the situation before you enter the market. Never change your opinion based on forecasts of other people when your position is already open.
Never practice "emotional" trading, and always rest of at least 24 hours after you either make a large profit or suffer a large loss. Continue to practice, maintain, and even improve your level of discipline. Also, keep on improving your normal, stable professional estimation of your possibilities.
If you don't know when you have to close a transaction with losses or when you have to fix the profit, do not make the transaction. Be sure to install the stop loss to cut your losses. Also, install the take profit to fix profits. Your take profit should be at least twice as large as your stop loss.
Do not use the "lock" method if you do not understand what it is. Those are just some general recommendations for those who may just be starting out in the Forex market
Forex Trading Plan
Many people have turned to Forex trading in the last couple of years in the hope of earning some extra money, and possibly with the hope of getting seriously rich as well. However, it is tough to make money from Forex trading which is why you should always approach it with a solid trading plan in place.
If you are going to make long-term profits, then you need to take it seriously, which means having a well-thought-out plan of attack. This all starts with the trading system you plan on using.
Before you even think about trading with real money, you need to do lots and lots of testing and experiment with various technical indicators to find a system that's going to make your money on a consistent basis.
It doesn't have to be perfect, and indeed a perfect system doesn't even exist, but it should have the ability to grow your account in the long run.
It may only have a success rate of 40-50%, but this can be more than enough to generate some decent profits. For instance, if you use a stop loss of 20 points and target 60 points per trade, then a win ratio of 40-50% would generate some very healthy returns.