Aspiring investors have a broad spectrum of options on where to put in their money for short and long-term benefits. Investments can be categorized into three main types, including ownership investments, lending investments, and cash equivalent investments. Each category has its own dynamics in terms of investment returns and other aspects. Here is an outline of the various individual types of investments that a new investor can make in the market today.
Investing in the stock market gives a new investor a wide range of opportunities to partner with specific companies, each of which offers different levels of returns. Stocks investments are relatively simple as they involve the purchase of companies’ stocks where the investor gets a share of the company’s future earnings. The returns from stock investments vary depending on many factors, including the pace at which the company grows. Such investments are also flexible as the investor can sell their shares to earn a profit at any time.
Bond investments are more of a loan that an investor can offer to a government or a company. Bonds work by investors lending out money at with an interest rate for a specified duration of time, generally about a year. Bond investments can be quite risky, especially in cases where the necessary authorities are not involved in safeguarding against the potential risk of defaulting the loan. Government bonds, however, are the safest options for a new investor to start with as they offer lucrative returns with minimal risk.
Mutual fund investments allow new investors to purchase an array of investments packaged into a single transaction. Mutual funds will enable an investor to pool together their investments into one package for ease of management. The diversified holdings in a mutual fund can be a positive thing as well as a negative aspect. The diversified investments offer an investor the opportunity to earn multiple incomes. Pooling together different investments, however, does exponentially increase the risk taken.
A new investor can also get an opportunity to start and run a new business as an investment option. This kind of investment requires a hands-on approach by the investor as it requires more than just the start-up capital. A particularly important aspect in the management of such a business investment is the skill and knowledge needed to make the investment decisions, such as the kind of goods or services to deal with, as well as the internal business management dynamics, such as marketing.