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Getting to Know the Three Types of Investments

Investing is defined as something purchased with money that expected to produce profit or income. However, there are three groups of investments, which serve as a guide for potential investors. Such would include cash equivalents, lending, and ownership. Here are some examples of these investments.

Cash Investments

These are investments considered good as cash types, which means they are easy to be converted back to cash. One example is the money market funds, which can produce minimal returns of 1-2%. However, the risks are also equally very small. Moreover, these types of investments are more liquid in comparison with other investments. Thus, you can write checks from money market accounts as you would with checking account.

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Lending Investments 

This option will allow you to become the bank. Lending investments tend to be lower risk than ownership investments, returning less as a result. A company can issue bonds to be able to pay a set amount over a certain amount of time. But, stocks of a company can double or triple in value during the same period, which pays a lot more than bonds do. However, it can lose heavily and will go bankrupt, wherein bondholders usually get the money and stockholders get nothing often.

If you are into savings accounts, you can also be called an investor. You are actually lending money to the bank in which it will dole out in loan form. Although it gives pitiful returns, it may not cause any risks because of bank insurance.

Ownership Investments

This class of investment is the most profitable and volatile. Examples are the following:

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Stocks – certificates that confirm your ownership of a portion of the company.

Business – money used to start and run a business is also called investment.

Real Estate – apartments, houses, and other dwellings that you purchase to resell, repair or rent out are also investments.

 

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