How Many Different Types of Investments Are There? - Growth Freaks

How Many Different Types of Investments Are There?

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Investments help a lot of people reach the level of financial safety they desire. It should come as no surprise that many people choose to invest their money instead of spending them blindly. As it turns out, there are many different types of investments that you can try, more precisely 10 main ones. Naturally, they all have different advantages as well as different risks. Before deciding on the best type for you, you should learn a bit about all of them by reading today’s article.

The 10 Main Different Types of Investments and Their Characteristics

1. Bonds

One of the most common types of investments are bonds. A bond is basically a loan you make to a certain organization. In exchange, you get interest payments, as well as the repayment of the principal when the bond reaches maturity date.

2. Stocks

Stocks are shares of a company that you can buy. Once you buy them, you basically own part of the company. There are multiple types of stocks, depending on the type of company, its size, performance, growth potential, and so on.

3. Retirement

When you’re saving for retirement, you can invest in retirement options that are tax-advantaged, such as an IRA or a 401(k). Usually, retirement investments differ from traditional investments, because they target the necessities of a retirement lifestyle.

4. Investment Funds

Funds get money from several investors and then invest it based on a particular investment strategy. There are several types of funds, like exchange-traded funds and mutual funds. They’re extremely diverse and they come in different styles.

5. Annuities

An annuity is a contract that you – as an investor – can make with an insurance company. The company then starts paying you periodically. It can do that immediately (immediate annuity) or at some point in the future (deferred annuity).

6. College Savings

Since saving for college is something a lot of people do, different companies and organizations have come up with college savings funds and accounts. Two examples would be the Coverdell Education Savings Accounts and the 529 College Savings Plans.

7. Insurance

Life insurance comes in different forms, from whole life, to term life, and universal life policies. Even these options come with variations (securities), like a variable life insurance.

8. Commodity Futures

A commodity future is an agreement to sell or buy a certain commodity sometime in the future and at a specific price. Commodities can mean a lot of things. Among the most popular are oil, financial currencies, metals, and animal products.

9. Options

As the name suggests, options provide investors with the right to sell or buy a security. However, this is not an obligation. This security can appear as an exchange-traded fund or a stock. You have to sell or buy it within a fixed time period and at a fixed price.

10. Security Futures

Similar to commodity futures, security futures allow you to trade on single stocks and security indices in futures contracts. The former option is also known under the name of single stock futures.

We should mention that these are not all the different types of investments out there, but they are 10 of the most important ones. You shouldn’t hesitate to consider them.

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Author: Amanda Knowles