10 Types of Investments Everyone Should Know About
There are many different types of investments to choose from, and it can be difficult to know which ones are the best for you. In this article, we will discuss 10 different types of investments that everyone should be aware of so they can make see if investing is the right choice for them and their money.
Nowadays investing is not just for older generations who have been saving their money over the years and are finally ready to invest. Younger generations are taking up that baton and trying their hand at different types of investments that can help them build on their finances from an early age.
They are seeking investment advice from professionals, looking into what a financial institution is, and how to deal with account fees, as well as setting up a brokerage account to manage what they have. If they are under 18 then their parents may set up a custodial brokerage account to help with their specific investments. Young people may have the question on their lips “how old do you have to be to invest?” well, it does depend on the state, but 18 onwards does seem to be the line, however, speaking to banks and investment specialists will give young people a solid answer.
With the rise of digital money and trading, investment markets have been targeting their marketing towards those who are interested in cryptocurrencies like –
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
These are just a few examples of what cryptocurrencies are currently on the market for people to invest in. It is important that they make the right investment choices, however, not all investments are a sure thing and they can go up and down depending on the market. This is known as market volatility.
A brokerage account, also known as an investment account, allows people who are investing in stocks, bonds, ETFs, and mutual funds to buy and sell through their account. To understand this further, Charles Schwab offers an explanation of what a brokerage account is as well as brokerage services, and how it can be used in the investment world.
Types of investments
Down below are some investments that may be a good choice for personal finance options. It is essential to remember that this is just an informational article and not here to provide investment advice or navigate people to certain investments.
Always speak to an investment professional first before jumping in, and make sure it is right for you, whether that be going into the stock market, opening up a custodial account for your child, or looking into index funds.
A savings account is a type of deposit account that typically earns interest and has limited withdrawal privileges. Savings accounts are a safe and convenient place to store your money, and they can be used to reach your financial goals. There are different types of savings accounts that will need to be researched before landing on a specific one.
Traditional savings accounts
This is a basic savings account and is a good option for those who want to save either for the short or long term, but are not bothered too much about the interest rate. You’ll find these accounts at banks or credit unions. If you have kids, you could think about opening a youth account that has had a good past performance.
High-yield savings accounts
For people who want to earn a more competitive rate on their savings without high fees. You can find these types of accounts with online banks and credit unions. If you are focused on growing your money then this is seen as a good account to have.
Money market accounts
If people want to earn money from their savings, then a money market account can be a great way to earn interest, plus it gives people more options to access their money. People who are fans of regular savings accounts and checking accounts may prefer this option as it has some of the two accounts features.
Those who are interested in competitive rates and do not need to have access to their money right away will find an account like this to be highly beneficial with their money. Leaving it for a specific period can help with gaining interest on your money for important purchases down the line.
If you are set on putting your money into a savings account then you need to be aware of what types are out there and how they can work for you as an individual. There are more accounts out there for people to look into if they want to see which would be best for their situation.
You may not think that retirement plans are classed as an investment, however, they are a way to get into things like stocks and bonds to help with saving for retirement.
This is a retirement savings and investing plan that is offered by employers to their employees. This plan will give employees a tax break on the money they contribute which will be taken from their paycheck and then invested into funds that they have agreed upon.
An IRA (Individual Retirement Account) lets you make tax-deferred investments to give you financial security when you finally get to your retirement. The types of IRAs available are –
- Traditional IRA
- Roth IRA
- Payroll Deduction IRA
- SIMPLE IRA plan
If you need further detail on each one of these IRAs, you may want to check out websites such as irs.gov, which will be able to give you a full breakdown of what they mean and how you can get started with putting them into place.
Employee stock ownership plan (ESOP)
Also known as employee share ownership, ESOP is classed as an employee benefit plan that will give employees the option of ownership interest in the company in the form of stock.
Hopefully, this has helped you see what retirement investments are good options and how you want to see your money fare in the future. In case you are still unsure about what to invest in, you might want to take the help of retirement planning services. Consultants from such services can help you understand and suggest investment plans that can give a better ROI when you retire. You may not be thinking about retirement just yet but it is a good idea to know what is out there and what you can do to be prepared as you want to go for a good investment option that pays dividends.
Money Market Accounts:
A money market account is a type of deposit account that typically earns higher interest than a savings or checking account. Money market accounts often have restrictions on withdrawals and transfers, but they can be a convenient place to store your money. There are different ways that MMAs work with a few features listed below.
It allows account holders to earn interest on their balances which is typically higher than a normal savings account, however, the interest rate can fluctuate, and investors have to be prepared for rises and falls in the market.
Debit cards –
Some banks with MMAs will provide a debit card as well which can be beneficial to those who want to use ATMs to withdraw money as well as deposit it.
Check writing –
Account holders may also be allowed to write checks using their money in this account too as they would do with any other basic bank account.
Pros and cons of MMAs
With any account type, there are pros and cons that will need to be considered before diving in.
- Higher interest rates
- Debit cards
- Insurance protection
- Checks writing services
- Fees (not atm fees)
- Limited transactions
- Minimum balance requirement
Once these pros and cons have been looked into, you can decide if this is the path you want to take and if it fits in with your current financial needs. Look around and see what banks offer you a good deal. You do not need to stick with the bank you are currently with, especially if there is a better option out there.
Treasury Bills and Bonds:
Treasury bills and bonds are types of government debt securities. Also known as T-bonds and T-bills.
These bonds are issued by the U.S Federal Government, with their maturities being greater than 20 years. Treasury bonds earn interest until maturity which then means that the investor is paid a par amount equal to the principle, as Investopedia states.
They are regarded as risk-free because they are backed by the taxing of U.S citizens by the government, which is always going to be commonplace.
A treasury bill is a short-term government debt obligation, with a maturity of one year or less. They are usually sold in denominations of $1,000. These bills are classed as low-risk investments as well as secure for people who want to be assured that they are not taking chances with their money.
You can purchase T-bills in two ways, either directly through the government or through a broker on the secondary market. This needs to be thoroughly looked at to see what the best way is.
Whether you want to go for T-bonds or T-bills, you will need to do your research before purchasing. Just because they are classed as virtually low-risk or risk-free, does not mean that they should be jumped on right away.
Corporate bonds are debt securities issued by corporations. They typically have terms of 5 years or more, and they can be a higher-yielding investment than government bonds. However, corporate bonds are riskier than government bonds and should be held in a diversified portfolio.
Types of corporate bonds
There are five basic categories of corporate bonds as corporatefinanceinstitute.com has said on its website. You may want to look into these further if you want to take a bit more risk when you invest.
- Public Utilities
- Banks and Finance Companies
- International Issues
If you want to take a look at corporate bonds, then you need to be aware that there is a risk involved. If you are able to offer more leeway with your money, then you will want to speak to a professional about them and see if it is the right fit for you.
A mutual fund is an investment that pools money from many investors and invests it in a variety of securities, such as stocks, bonds, and short-term debt. Mutual funds offer professional management and diversification, which can make them a convenient and low-cost way to invest.
Money market funds
These have almost low risk. It is classed as a mutual fund that invests in highly liquid and near-term instruments, e.g. cash, cash equivalent securities, and high-credit-rating, debt-based securities with short-term maturities.
These have higher risks than MMFs because they normally aim to produce higher returns. This does mean that risks and rewards can be incredibly varied.
These invest in corporate stocks, however, they are not all the same and will need further research into which ones would be best depending on financial standing. You may want to look at individual stocks to see if this may be a good option.
Target date funds
These funds are a mixed bag and will hold stocks, bonds, and other investments. They will change over time and are suited to those who have retirement dates in mind.
These mutual funds cover a wide range in the investment group. This can be great for people who are looking at varied ways that they can make money, and are keen to make investment decisions that are based solely in funds. These types of investments can yield better profits which can be helpful for people in their old age after they retire. For instance, someone may face a critical illness for which they may require homecare services (similar to the ones provided by home healthcare Nashville or the ones in your locality) or a professional caregiver who can help them with their daily chores. Services like these can require good savings in order to meet all medical needs. Therefore, making wise investments in your early years can be essential. Just bear in mind that some are more high-risk than others which will need a further gathering of information.
Exchange Traded Funds:
An exchange traded fund (ETF) is a type of investment that trades on an exchange like a stock. ETFs typically track an index, such as the S&P 500, and they can offer investors exposure to a wide variety of asset classes.
Types of ETFs
As with many investment opportunities, ETFs will have different types that people can invest in.
These funds are mutual fund schemes that invest their assets in different companies’ stocks. These are classed as great investment options as they can potentially create long-term wealth for the investor.
These funds normally invest in bonds or other debt securities. At the maturity of these bonds, investors are paid the amount they previously invested. Government and corporate bonds are seen as the most common types.
This is where people invest in raw materials, e.g. agricultural products which are known as commodities. These funds can invest in precious metals, energy resources, and agricultural goods.
These are just a few ETFs that can be discussed further by investors. They are normally debated against mutual funds, with people for and against both. However, it is for the individual to decide which is best for their investment accounts.
Real estate can be a great investment especially if you have the help of experts (like finlaybrewer.co.uk) and the property is in the right location. But it is important to remember that it is an illiquid asset. This means that it can take time to sell your property and you may not get the full value of your investment back if you need to sell quickly.
Types of real estate investments
There are specific types of real estate investment opportunities for those who want to dip their toe into the property market.
- REITs – known as real estate investment trusts, are companies that own commercial real estate. You can use the stock exchange to invest in hotels, offices, etc.
- Crowdfunding platforms – these can offer investors access to real estate investments, however, they are high-risk despite the potential for high returns.
- Residential real estate – investing in property where people live, so homes and condos. They collect rent from their tenants, essentially becoming landlords.
- Raw land – Investors can buy land for commercial or residential development. You might have come across Texas or Colorado ranches for sale, which can also be a reliable investment option to consider.
Real estate investments can be a great and lucrative opportunity for those who want to see their money being put to use in physical form, however, some of them can be risky if the proper investigations are not conducted properly.
Precious Metals (and gemstones):
Precious metals, such as gold and silver, can be a good way to diversify your portfolio. They tend to be less volatile than other investments, but they can still offer the potential for growth. To extend the ‘precious’ category, gemstones like diamond jewelry can also be invested in depending on how much you want to spend on your investments.
Gold is a very well-known precious metal to invest in. It is known to be incredibly durable because it does not rust and has malleability. It can be used for dental needs as well as in electronics. However, it is more widely known for being in jewelry and as currency.
Despite it being as well-known as gold, it swings between its value in store and its industrial applications as a metal. This causes price fluctuations in the market and has a label of volatility compared with gold.
This type of metal fetches a higher price than gold as it is a lot rarer than gold as it is not pulled from the ground in the same volume as gold and silver, so it is seen as more ‘precious’ which drives up the price. It is also classed as an industrial metal like silver.
Buying diamonds or investing in diamonds can be seen as something high-end and intriguing. So, are diamonds a good investment? They are rare and they do have a high value, and just like gold, the value of diamonds increases naturally, but that depends on the reduction of the resource.
Getting your hands on a certified diamond can be incredibly sought after, but people need to be aware that there are scams out there and any investment offers will need to be looked into thoroughly first. They can be classed as a good investment if you know what you are doing and what to look for.
Whether you are planning on investing in a precious metal or gemstone, it is key to know what you are getting yourself in for and know that there will be scams out there in this sector. Have any metals/stones checked and certified first to ensure a safe and above-board transaction.
Collectibles, such as art, coins, and stamps, can also be a good investment. However, it is important to remember that collectibles are often illiquid and their value can be difficult to determine.
Advantages and disadvantages
There will always be ups and down with collectibles so it is important that you check them out for whichever collectible you are thinking about investing in. Forbes has a great page on how to invest in collectibles and what the pros and cons are. You can read the condensed bullet points below.
- Following a personal passion
- Easy access
- Rampant fraud
- Tough comps
- Lack of liquidity
- Damage will diminish the value
- Have to store and insure them
- No income stream
If you are still interested in investing in collectibles, then take the bullet points above and delve into what each of them means for you and if there is any way you can make solid investment choices when dealing with them.
When it comes to investing, there are many different options to choose from. It is important to do your research and understand the risks and rewards of each type of investment before making any decisions. Hopefully, this article has been able to offer up any answers you have been seeking. Whether you are looking to start investing, want to buy diamonds, or are interested in other assets, let’s hope you are more informed at making any and all decisions.