Investment Basics: Your Different Options
In today's world, knowing how to invest your money is one of the most effective ways of securing your future. Some of the most common types of investment methods are bonds, stocks, investment trusts, endowments, ISAs and mutual funds. By studying each of these options, it will be much easier for you to make your choice.
A bond is a government or corporate issued security that pays the bondholder a specific amount of money at specific intervals and repays the principal amount of security at maturity. It grows with an interest of around 7 percent depending on the market situation.
There are many kinds of bonds. Some of them include guaranteed income and growth bonds, high income and growth bonds, investment bonds, and with profit bonds. Each of these types of bonds have its own specified rules and limitations that you have to know about to be able to make an informed decision.
Stocks, meanwhile, are shares in companies that can be bought by individuals as a form of investment. For instance, you can buy stocks in a company for $10 and the next day the shares can cost as much as $15 per share. The stock market offers returns as much as 10 to 12 percent annually.
Although investing on stocks sounds good, one should be careful when doing so because shares prices can fall significantly and you may end up losing a lot of money. What you should do is to study properly about the company you are investing in.
The different forms of stocks are the cyclical stocks (stocks in industries that go accordingly with the economy), defensive stocks (offer more conservative returns than cyclical stocks), interest-rate-sensitive stocks (vary accordingly with interest rates), growth stocks (show high levels of profit growth) and value stocks (typically sell with low valuation).
Investment trusts are companies that buy shares of other companies as a collective investment. One can invest money in an investment trust and be a part owner of the company.
Another type of investment method is endowment, which is a policy in which the sum is paid on a set date, or on the death of the policyholder whichever comes first. Some forms of endowments include With Profit, Unit Linked, Flexidowment, Lowstart and Non Profit.
ISAs or An Individual Savings Account is an investment and savings method designed to be free of tax to encourage UK citizens to save and invest.
Lastly, mutual funds are professionally managed funds where your money is pooled together with other investors' and the capital is used to invest in other forms of securities. When you invest in a mutual fund, you will become a shareholder in a diversified portfolio of investments.
With the complexity of the investment world, it is understandable that some people may be hesitant to take on the investment route. But there is really nothing to be afraid of especially because there are now many helpful resources online, such as this article that would help you understand your different options when it comes to investments.
A bond is a government or corporate issued security that pays the bondholder a specific amount of money at specific intervals and repays the principal amount of security at maturity. It grows with an interest of around 7 percent depending on the market situation.
There are many kinds of bonds. Some of them include guaranteed income and growth bonds, high income and growth bonds, investment bonds, and with profit bonds. Each of these types of bonds have its own specified rules and limitations that you have to know about to be able to make an informed decision.
Stocks, meanwhile, are shares in companies that can be bought by individuals as a form of investment. For instance, you can buy stocks in a company for $10 and the next day the shares can cost as much as $15 per share. The stock market offers returns as much as 10 to 12 percent annually.
Although investing on stocks sounds good, one should be careful when doing so because shares prices can fall significantly and you may end up losing a lot of money. What you should do is to study properly about the company you are investing in.
The different forms of stocks are the cyclical stocks (stocks in industries that go accordingly with the economy), defensive stocks (offer more conservative returns than cyclical stocks), interest-rate-sensitive stocks (vary accordingly with interest rates), growth stocks (show high levels of profit growth) and value stocks (typically sell with low valuation).
Investment trusts are companies that buy shares of other companies as a collective investment. One can invest money in an investment trust and be a part owner of the company.
Another type of investment method is endowment, which is a policy in which the sum is paid on a set date, or on the death of the policyholder whichever comes first. Some forms of endowments include With Profit, Unit Linked, Flexidowment, Lowstart and Non Profit.
ISAs or An Individual Savings Account is an investment and savings method designed to be free of tax to encourage UK citizens to save and invest.
Lastly, mutual funds are professionally managed funds where your money is pooled together with other investors' and the capital is used to invest in other forms of securities. When you invest in a mutual fund, you will become a shareholder in a diversified portfolio of investments.
With the complexity of the investment world, it is understandable that some people may be hesitant to take on the investment route. But there is really nothing to be afraid of especially because there are now many helpful resources online, such as this article that would help you understand your different options when it comes to investments.
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