As an investor, you have a lot of options for where to put your money. So, it’s important to weigh the types of investments carefully before taking the final plunge. Investments are generally bucketed into three major categories: stocks, bonds, and cash equivalents. Of course, there are many different types of investments within each bucket, however, we, at The Hamptons at East Cobb Apartments, are here to cover the 3 main types of investments today. Prepare yourself for your financial future and learn more about where to invest your hard-earned money below!
A stock is an investment in a specific company. When you purchase a stock, you’re buying a share of that company’s earnings and assets. Companies sell shares of stock in their businesses to raise cash, and investors can then buy and sell those shares among themselves. Stocks have the potential to earn high returns, but they also come with more risk than other investments. Companies can lose value or go out of business at any given moment, putting your investment in jeopardy. However, if you’re smart with your stocks, and sell them when they go up for a profit, you can expound upon your initial investment.
A bond is a loan you make to a company or government. When you purchase a bond, you’re allowing the bond issuer to borrow your money and pay you back with interest. Bonds are generally considered less risky than stocks, but they also may offer lower returns. As with any loan, the primary risk is that the issuer could default. Federal government bonds are backed by the “full faith and credit” of the U.S., which effectively eliminates that risk. State and city government bonds are generally considered the next-less-risky option, followed by corporate bonds. The less risky the bond, the lower the interest rate.
If the idea of picking and choosing individual bonds and stocks isn’t your bag, you’re not alone. In fact, there’s an investment designed just for people like you: the mutual fund. Mutual funds allow investors to purchase a large number of investments in a single transaction. These funds pool money from many investors, then employ a professional manager to invest that money in stocks, bonds, or other assets. Mutual funds follow a set strategy, and some invest in both stocks and bonds. The risk all depends on the investments within the fund itself!
Improve your daily life with help from The Hamptons at East Cobb Apartments in Marietta, Georgia. By passing along this information, we hope to provide you with all that you need to live your life to the fullest.