There are four main types of investments you should know. Each with its unique characteristics, benefits and risk.
It is pertinent that you familiarize yourself with these investment types so that you can begin to determine which will fit your circumstance and risk tolerance.
We have put together four types of investments you should know to guide you in making the best decision when it comes to your assets and investments.
Shares are a growth investment; they help to grow the value of your original investment from medium to long term.
Take for example, if Mr Tunde owns shares, he can likely receive income from dividends. These dividends are a portion of a company’s gain paid to its shareholders.
The prices of shares can be volatile from time to time, as a result, the values of shares may also fall below the price you paid for them. This is why shares are generally best suited for long term investors, who are comfortable withstanding the ups and downs of the capital market.
Shares are also known as equities.
Property is a highly valued investment by many because of its appreciative value. It is considered as a growth investment because the price of lands and other properties can substantially rise over time.
However, properties just like shares carry the risk of loss as well, they can also fall in value. A house for example can get burnt or just collapse due to one reason or the other sometimes beyond your control.
You can invest in property either by buying a property directly or through a credible property investment company like Buyletlive.
3. Cash Investment
This includes high interests’ Savings, Fixed Deposit, Treasury Bills. Term Deposits and everyday bank accounts.
From experience, cash investments typically carry the lowest potential return or return on investment (ROI) of all the investment types.
Cash investments can offer regular income but no real chance of capital growth. However, the best part of this investment is that it a low-risk investment and reduce the risk in an investment portfolio.
4. Mutual Funds
This is a pool of money from different investors to be invested on specific investment goals. Here, money is raised by selling shares to investors, the money is then used to purchase an array of portfolio which may include; bonds, stock, short term money market, assets, securities, of a combination of more than one.
Each investor owns a slice of the funds and proportional rights based on the number of shares he or she owns that’s the funds generates from its investment.
It is important to note that mutual funds are also known as equity investments. Your equity provides you with a share of what the funds makes in interest, makes in capital gains, and receives if it holds a bond to maturity.
The four types of investments listed above are a bit part of a whole other types of investments. In today’s world, new ideas keep popping up on the go on how people can multiply their funds by investing.
However, it should be noted that not all that glitter is gold. We advise that investors do their due diligence and ascertain risk factor according to their strengths before investing.