What are the different types of investment? Investment is a term used to describe something that you put your hard earned money on. It is the process of buying a product or property with value and expects the value to grow as time goes by. There are three basic types of investments. These three types of investments are ownership investments, lending investments, and cash equivalents.
Ownership investments are those types of investments that entail physically owning things that have value. These are unpredictable and volatile. They are, as well, the types of investments that are very profitable. However, these can lose value as well. There most common examples of these types of investments are stocks. Stocks are basically certificates that state that you exchanged money in turn for a portion of a certain company. Many people play the stock game, as one investment can turn gold very easily when you know the stocks game well. Keep in mind that when you buy a stock or stocks, you will have the right to the company you chose to get stocks from. If your stocks are the biggest, then you will have control over the company as you will be the main decision maker there. Many people are also into real estate investing. The best part about this is that land and these kinds of properties do not easily depreciate in value. These are the types of investments that are most likely to appreciate. Therefore, even when the investment cost is high, many people opt to take this road.
Lending investments, on the other hand, are types of investments wherein you will be allowed to be the bank. You see, many people need to get different kinds of loans. If you would want to get into the lending investment business, then you will have to shell out a certain amount and loan it to a certain person or entity. As time will go by, the money you loaned will incur interest. This interest will be yours. Your savings account is a perfect example of lending types of investments. If you will notice, the money that you have in your savings account will increase as time goes by. This is because it will incur interest from the bank. Other common examples of these are bonds. Bonds are like stocks, too. However, these are types of investments that you do with the government.
Cash equivalents, as the name implies, are investments that are good as cash. These are investments that you can easily turn into cash when you need them. A common example of cash equivalents is the money market fund. The return amounts here are very small. However the risk you are taking are small as well. These money market funds are the most liquid compared to the other types. You can easily write checks from your money market funds when you need cash – just like what you do in your checking accounts. These are the investment types that are chosen by people who want to be sure that they will get their money back. Although the returns are small, they would rather wait than to risk large amounts of money.