It’s been hinted on for several articles; now, we will discuss nine (9) investment vehicles you can choose to invest your money in. There certainly are more but today, we will be covering the most viable and relatively easiest to understand. These will just be overviews with quick comparisons at the end, so you can expect that we will make separate articles for some of these investment vehicles.
We start off with the investment vehicle designed to mitigate risk, insurance. There are different kinds of insurance for different purposes. There are fire insurance, car insurance, travel insurance, health insurance and life insurance. What all these have in common is that they guarantee payment whenever their respective covered tragedy occurs. I’d like to zero in on life insurance in particular because the tragedy it covers is death which is bound to happen. It’s not a matter of if but a matter of when. It is definitely a must have investment. (As you may know, we offer such investment. Click here to get a proposal.)
Investing in real estate can be one of the most expensive option on this list. You might be able to consider this a high-end investment vehicle but the returns are often great. More often than not the value of properties go up. You can also turn it into rental spaces which can earn you a steady stream of passive income.
You can think of business as the type of investment vehicle you can customize and constantly upgrade. Anyone with money can have a business but to really own it, it needs to reflect your ideas and your character. There are different types of businesses and even more industries choose from. Starting one is not easy. Having an idea doesn’t guarantee people will buy it, even if it’s a good one but the potential returns are very promising. A business can provide you a stream of passive income. It may even help out others by giving them employment depending on the type of business you choose to operate. There are a lot things to consider when starting one. We are not just going to make a future article on this but a whole series all on its own.
Before using the fiat money we have today, every banknote was backed up by gold. This was known as the gold standard. The problem with this though, is that the number of banknotes will be limited to the quantity of the gold reserve. Unlike paper bills, gold have some sort of intrinsic value. It will be less susceptible to price changes as compared to currencies. Note that this is not the type of investment vehicle that you’ll expect to earn passive income from. This is more of a trader’s investment wherein you can hope to sell it at a higher price.
Stocks are also called shares or equity. This is a type of investment vehicle that signifies ownership in a corporation which also represents a claim on part of the corporation’s assets and earnings. Stocks allow you to earn different ways; think of an investment vehicle with a lot of features. It is also combined with other investment vehicles at times to form a new kind of investment.
Stocks has elements of both a positive sum and zero sum game. It is a positive sum game in the way that stockholders profits when the company does well. For any serious investor, learning to invest in stocks is a must. Learning the principles of trading, reading graphs and understanding the meaning behind the numbers of a company will be helpful in understanding other investment vehicles.
Unlike stocks wherein the profits depend on the company’s performance, bonds are fixed income investments. Think about this as a train with just a specific destination. In bonds, an investor loans money to some entity, usually to a corporation or to the government. These entities borrow the funds for a defined period of time at a variable or fixed interest rate.
This investment vehicle gives access to individual investors to professionally managed portfolios. It is made up of a pool of money collected from many investors which money managers invest in securities such as stocks, bonds, money market instruments and other assets. Think about this as having a driver when you don’t feel like driving or aren’t that good at driving. This kind of investment is recommended for those who are not yet well versed in stock investing and those who just wants to diversify.
Forex stands for the foreign exchange market, the market which determines the foreign exchange rate of currencies. Earning from this type of investment relies on buying low and selling high to make a profit. Just like stocks, there are certain indicators that the savvy investor will need to learn.
Cryptocurrency was sensationalized by the bitcoin which soared in value this year. Invented by Satoshi Nakamoto, an unknown person or group of people, bitcoin started a new revolution for currency. Basically, a cryptocurrency is a digital or virtual currency that uses cryptography and the blockchain technology to have a decentralized system of money. For security, it uses a distributed ledger enforced by a disparate network of computers which allow for checks and balances. Since the bitcoin bubble, there have been many other cryptocurrencies entering the market. There are some which do fairly well while others fail. Despite these setbacks, cryptocurrency still holds great potential for investors all around the world.
Making Sense of It
Those are the some of the most common investment vehicles we have. Now, let’s try to find the best ones to have. There are investment vehicles that are designed just to help you grow your money enough to achieve financial security, then there are those which gives the opportunity to earn large profits to make you rich. Investment vehicles like insurance, mutual funds, bonds belong to the first category which gives financial security. Stocks, forex, cryptocurrencies, they have the potential to earn you large profits but you have to understand that there’s higher risks for high returns.
Let’s compare mutual funds and stocks for example. As said, mutual funds is like having a driver since the money manager makes the decisions. Stock investment is like being in a race car with many features like Speed Racer’s Mach 5. You are not likely going to crash flat on your face with mutual funds; however, you aren’t also going to be able to win a race or go crazy speeds. In investment terms, you can’t expect a large profit from such investment. Stocks on the other hand, give you the freedom to make investment decisions. In the end, it’s really up to you to decide which investment vehicles best suits you. We will be happy to help you make more informed decisions through our articles here and you can also schedule a free financial consultation.
Thank you for staying with us. As a way to show our appreciation, here’s a bonus investment vehicle:
Whether it’s learning how to invest or learning a new skill, education is an investment in yourself. By continuously learning, you’ll be able to keep up with changes and even open up new opportunities. The best thing about it is that it is an investment that has no losses (factoring out opportunity cost of doing something else). It is also one that can be shared with others. And if helping educate others resonates with you, you just might be the type of person we need and hope to work with in the future.
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MysterE is the stage name of Earl Wong, a magician, educator and entrepreneur. He has dedicated his time and effort to creating educational materials with a sprinkle of magic. He is also a financial advisor affiliated with Sun Life Financial which allows him to personally spread financial literacy.