Different Types of Financial Investments

Sunday, November 4, 2012

Different Types of Financial Investments

Basically, an investment is something you buy now to use several years in the future. It is nothing more than a product bought with the hopes that it will appreciate in value or generate future income, so you don't always have to worry about working or making a weekly, bi-weekly or monthly paycheck. In the natural order of things, you want to place a certain small percentage of your income in investments, so you ensure your future lifestyle and continue having the ability to support yourself and your family, when times are lean or when you are no longer able to work.

It's all in the Planning

When starting to invest you must have an objective and a plan. You want to avoid investing just for the sake of investing. You need a goal and must comprehend the importance of your investing participation. You must develop a focused approach, and that starts by deciding the global amount you want to obtain 5, 10, or even 20 years from now. Discover and perform research on all the types of investments that can help you obtain your total goal. Investing in certain products just because someone you know does it is not a good enough reason to invest in that product. You have to analyze the potential for growth, and the risk factors in each of the products you decide to invest in.

Generally, you want to invest in products that give you maximum return, but you also want to keep your investment money as safe as possible. If investing is something you enjoy, you will become familiar with top emerging markets, learn trends and know what to look for in an investment that is on the rise. On the other hand, if you don't have the time to skim through the financials every day for the next 20 years, and aren't interested in learning the upcoming financial trends, processes, in analyzing each and every investment you make prior to making it, then you may want to appoint a qualified financial advisor (even those who are experienced in finance often opt for this option). He is a professional who will help you plan, analyze all your investment options, and help you purchase and sell investments when the moment is appropriate.

When is the Right Time to Start Investing?
While any age is appropriate, when you are still in your 20s and 30s, you have plenty of time to make those initial investments grow into large amount. However, the older you are, the more you need to invest on a monthly basis to obtain that substantial investment amount you want by a certain age.

What Types of Investments Should I make?

There are several types of investments, although some are more secure than others. The following defines which investments these are and their general overview:

1 - Fixed Deposits

This is a kind of investment we all know of as the savings account. While these are the most secure investments because all banks are FDIC insured, meaning if the bank goes bankrupt you are assured of getting your investment back, this type of investment also offers one of the smallest returns, at approximately 1% to 5% depending on the account you have. This type of investment may be adequate when putting away funds for a specific expense or for a rainy day, but it won't produce a substantial return over a long period of time.

2 - Mutual Funds

A mutual fund is actually a group of stocks and bonds. An investor pools his money with other investors to buy a mutual fund. The group then pays a certified financial manager to handle the mutual fund and buy specific stocks and bonds he has studied and analyzed over a specific period of time. Mutual funds are often long standing groups and already have a specific goal and manager in place by the time you buy into it. 

The manager then focuses on buying stocks that keep with the goals of the group. The advantage to this type of investment is that you can purchase it without really having the experience needed in choosing a specific stock. The theory behind this investment option is that you get a better return on investment by placing an experienced financial administrator at the helm of the fund, than if you chose specific stocks yourself in the stock market today.

3- Bonds

These are known as fixed-income securities and are basically founded on debt. By purchasing a bond, you loan money to a company or to the government, and in return, they offer you a certain pre-arranged interest rate on your money. Additionally, they agree to pay your money back within a certain time frame. This investment is often popular among investors because it is safe. If, for instance, you buy government bonds, then your purchase is almost 100% guaranteed. But these investments come at very little risk so the returns are also very small.

4- Stocks

When investing in a particular stock, basically you become a part owner in the business, but just as any business you open, the risk of seeing a profit is substantially higher. As a stock owner you can vote at shareholder meetings, receive profits (dividends) and sometimes expect profits to soar over a certain period of time. While stocks can produce a substantial income, they are also quite risky. That's why all stock investments must be researched before putting your money into them. 

Additionally, you must constantly follow the daily, monthly and quarterly earnings to ensure that your investment is continually growing and not disappearing. Although stocks provide higher potentials for returns, you must also be ready and willing to risk some, or all of your investments at any given moment.

5- Alternative Investments

Gold as an investment should be looked into. Investments include buying Gold bullion coins or gold bars, Currency, Futures and Options

These can be more complicated investments, as they represent many numerous alternatives and securities. Investors in this market are known as Forex investors, and these investors take the highest risk of all. In most situations, only experienced investors with extensive knowledge in currencies, or gold and silver value, invest in these products and prices fluctuate daily and even hourly. One minute an investor may have a substantial amount and the next he or she may be penniless.

Bottom Line

Financial investing is a positive activity that should be performed over a number of years. It allows you to enjoy life without having to worry about future money problems. Investing makes sure you have funds for a medical emergency, or any future problems, and therefore, you can just sit back and relax. Even so, when investing, you shouldn't just put a specific amount in your financial advisor's hands every month. 

You should learn about the investment types and companies your advisor suggests, learn to mix your investments so you have some higher risk investments mixed with those that are more secure. As you continue investing, you should learn more about finance so you don't rely completely on the expert opinion of your financial advisor.

Author’s Bio-

Jamie Cody writes for centernetworks. He has in-depth knowledge on technology and writes reviews for hosting products. 

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