greenieS
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TYPES OF INVESTMENTS
Investments in shares
An investor in a company that buys shares becomes the fractional owner of that company.
The holders of a company's shares are known as its shareholders and can benefit from its growth and success by appreciating the share price and regular dividends paid from the company's profits.
The shareholders of a company have the right of co-ownership over the company in which they hold shares.
Bond investments
Bonds are liabilities of issuing entities, such as governments, municipalities and corporations. Buying a bond implies that you own part of the debt of an entity and that you are entitled to receive periodic interest payments and to be refunded the nominal value of the bond at maturity.
Investments in funds
Funds are complex instruments managed by investment funds that allow the population to invest in stocks, bonds, preferred stock and commodities. The two most common types of funds are mutual funds and exchange traded funds (ETFs).
Real estate investments
REIT real estate investments, the most popular types of investments in this category, allow people to invest in real estate through the stock market, like ETFs. REITs invest in commercial or residential properties and pay regular dividends to their investors from rental income. REITs are traded on the stock exchange and thus offer investors the advantage of instant liquidity as opposed to owning an apartment. Another advantage of REITs is that they offer investors who do not have the capital needed for a real estate investment the opportunity to benefit from a passive investment in them.
Investments in goods
Goods include metals, oil, gold, etc. They can be traded through contracts. The goods can be used for risk management or for speculative purposes.
INVESTMENT V.S. Speculating
The classification of an investment act depends on three factors:
Risk level assumed:
Investments are defined as involving a lower level of risk compared to speculation
Investment holding period:
Investments involve a longer holding period. On the other hand, speculations are held for short periods, which can sometimes mean even a few seconds.
Yield source:
In most cases, price appreciation is the significant part of the return on investment, while dividends can be seen as an additional return. In speculation, the only source of profit is the difference between the purchase price and the sale price.
Investments in shares
An investor in a company that buys shares becomes the fractional owner of that company.
The holders of a company's shares are known as its shareholders and can benefit from its growth and success by appreciating the share price and regular dividends paid from the company's profits.
The shareholders of a company have the right of co-ownership over the company in which they hold shares.
Bond investments
Bonds are liabilities of issuing entities, such as governments, municipalities and corporations. Buying a bond implies that you own part of the debt of an entity and that you are entitled to receive periodic interest payments and to be refunded the nominal value of the bond at maturity.
Investments in funds
Funds are complex instruments managed by investment funds that allow the population to invest in stocks, bonds, preferred stock and commodities. The two most common types of funds are mutual funds and exchange traded funds (ETFs).
Real estate investments
REIT real estate investments, the most popular types of investments in this category, allow people to invest in real estate through the stock market, like ETFs. REITs invest in commercial or residential properties and pay regular dividends to their investors from rental income. REITs are traded on the stock exchange and thus offer investors the advantage of instant liquidity as opposed to owning an apartment. Another advantage of REITs is that they offer investors who do not have the capital needed for a real estate investment the opportunity to benefit from a passive investment in them.
Investments in goods
Goods include metals, oil, gold, etc. They can be traded through contracts. The goods can be used for risk management or for speculative purposes.
INVESTMENT V.S. Speculating
The classification of an investment act depends on three factors:
Risk level assumed:
Investments are defined as involving a lower level of risk compared to speculation
Investment holding period:
Investments involve a longer holding period. On the other hand, speculations are held for short periods, which can sometimes mean even a few seconds.
Yield source:
In most cases, price appreciation is the significant part of the return on investment, while dividends can be seen as an additional return. In speculation, the only source of profit is the difference between the purchase price and the sale price.
