An investor has a lot of choices to deposit his money. It is significant to consider them carefully. Investing threatens many people and many options can be tough to form out which investments are precise for your range.
Now there are many different types of investments an individual could make however not all investments are created equally, some investments are much riskier but have higher returns while other investments are safer but they have lower returns.
So before getting into types let us quickly understand the concept of RISK VS RETURN.
RISK can be defined as Chances of losing your money, whereas RETURNS refers to the money which you are earning from your investment.
Types Of Investment based on RISK VS RETURN:
High-Risk High Return:
Simply Higher the risk you will take, it may generate Highers returns.
Low-Risk Low Return:
Lower the risk the return would be lower.
Medium Risk Medium Return:
This is the concept which includes both High risk and Low risk and generates moderate returns on your investment.
READ ALSO: WHAT IS MUTUAL FUND?
Let us now discuss about the TYPES OF INVESTMENTS :
- FIXED DEPOSIT
A Fixed deposit is one of the safest option and the most common option for investing.
It comes under Low-Risk Low Return Scheme, If you’ve invested your money in FD then the risk is very low but the expected returns are also very low.
So to invest in Fixed Deposit you need to visit a bank. Bank will keep your money with them for a fixed period of time and provide you the fixed returns on behalf of that investment.
Mostly the FD’s are for a fixed period of time but in few cases banks allow you to liquidate your money at any point in time.
Stock is a share in a particular company. Buying a share is considered as taking ownership of that company.
There is a small portion of that company’s earnings and possessions. Some companies sell shares of stock in their companies to increase cash, investors can purchase and sell shares with themselves.
Stocks occasionally produce higher returns but also appear with the extra possibility of loss compare to other savings.
Mutual funds investment is basically a pool of many investors which is then invested in a fund that is made of a selective group of companies.
A Mutual fund is a savings planned just for people similar to you. Mutual funds permit investors to buy a big number of investments in a particular transaction.
A specialized fund manager is assigned to manage the investments of people who take care of the money invested and switch the funds to generate more returns.
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Many people utilize annuities as an element of their withdrawal savings plan. While you purchase an allowance, you buy a bond with an assurance company and in return, you find cyclic payments.
Bond is a loan that you lend to a business or administration. When you buy a bond, you are allowing the link issuer to use your money and give you back through interest.
Buying bonds are considered to be a safer investment as compared to buying a stock, and it also generates lower returns.
State and city administration bonds are normally measured by the next-safest alternative, followed by business bonds. If the bond is secure then the interest rate is lower.
- Exchange-traded funds
ETFs are a form of an index fund. They follow a standard index and plan to reflect that index’s concert. Similar to index funds, they are inclined to be cheap than mutual funds as they are not properly managed.
The main difference between the index funds and ETFs is that ETFs are buying: They deal on an exchange similar to a stock that means you can purchase and sell ETFs all through the day. There is an ETF’s cost will vary during the day.
Mutual funds and index funds are alternatively that are cost once at the ending of every trading day. The cost will be identical regardless of what time you purchase or sell.
There is an option that deals to purchase or sell a stock at a set cost through a set date. Options present elasticity, as the agreement doesn’t really require you to purchase or trade the stock. As its name suggests, doing so is a selection. There are most options contracts, which are for 100 shares of stock.
Investments are a very important aspect to make higher returns of your money but most the people failed to make higher returns because of lack of knowledge, I highly suggest to understand about your investment first before doing it.
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