Investing Basics – Understanding the 3 Main Categories of Investment
To invest simply is to put money into an investment with the intention of seeing a return/profit at some point in the near future. Simply put, to invest simply means holding an asset or an object with the intention of making a profit from the investment or both the initial investment and the appreciation of the investment that would be an increase in both the price and the value of the underlying asset over a certain period of time. There are various ways to make an investment. One could go in for an annuity which would guarantee a steady stream of income for a fixed period. You could also go in for a mutual fund in which case you as the investor are guaranteed a specific amount in return for a pre-determined period.
There are various types of investments. One such type is what is known as fixed investment. This involves an interest only loan or a portfolio of assets that have a definite rate of return. Another type of investment is what is called a variable interest rate investment. These types of investments are mostly undertaken by large financial institutions for the purpose of raising long term finance.
A third type of investment is what is known as a growth investment fund. This is an investment fund that is designed to be able to provide higher returns over a longer period of time, say 30 years or more. In order to qualify as a growth fund, the actual return on the fund should be higher than that on the average stock market return over this period. Most of the time, a growth investment fund will be established for a particular sector like real estate or stocks. It follows that most long term investors will generally invest their funds in these sectors.
An investor can also go in for what is called a distressed investment. A distressed investment is one where the price of an asset has dropped significantly. In many cases, this can happen because of the poor economy or even because of the housing bubble bursting. The distressed investment is considered risky by most professional investors because the value tends to drop rapidly. These investments are meant to provide higher returns to those who can endure the loss of capital value, but the typical investor will not want to take this kind of risk.
There are some common investing strategies that you can use regardless of which of the main categories of investments you are involved in. Probably the best way to approach most of these investments would be to diversify by investing in various kinds of securities. This will ensure that your risk level is kept as low as possible while still being able to reap the benefits of diversification. This can be done by buying different kinds of stocks from different companies in different areas. You should try to focus on the fact that you are still investing in core companies and not in areas where they are making their strongest.
If you are new to the world of finance and don’t have a lot of experience, you may want to consider investing in options like bonds. These are considered as long-term investments as they are guaranteed by the government and are also secured by a number of different entities. These options are safe, yet are not free of risk because they are also affected by various global events like stock market, interest rates, and even the political stability of certain countries. These are considered among the safest options for investors who want to make sure that their money remains secure even when the economy of a country is faced with a crisis.