Types of Investment and their Meanings

Financially, investment is more than just a great business idea. There is no one rich or wealthy man that had lived or is still living this earth that has had no knowledge of the immense importance of investments. Investment, as you should know it, is a property or asset that is got in order to make a huge profit from it later in the nearest future. It is also more than saving for rainy day because investment does not only keep your money and return it to you, but that it also gives you back a great increase, and such is the game of the truly affluent individuals. The fact that investment comes in kinds and varieties is why you will taken through knowing the types of investment and their meanings.

Types of Investment and their Meanings

For the sake of fact and information that will open your eyes to the dynamics of investments and then help you grow interest in becoming an investor yourself, this content is set to take you through some of the types of investment and their meanings you should care to know.

1. Public Provident Fund

Public Provident Fund (PPF) is considered as one of the best investment options for long-term investors who are seeking guaranteed returns. Current PPF interest rate is 7.1% p.a. till September 2022 and it is a government-backed scheme, it features minimal risk to the principal amount invested.

2. Bonds 

Bonds means lending your money to an institution or government, for which you receive fixed interest at regular intervals and also the face value upon maturity. The rate of return for bonds is typically much lower than it is for stocks, but bonds also tend to be a lower risk.

3. Mutual Funds

Mutual funds are a type of investment where money from multiple investors are pooled and invested by professional fund manager. Depending on your risk tolerance, investment tenure and returns expectations, you can choose to invest in Equity Mutual Funds, Debt Mutual Funds or Hybrid Mutual Funds. You can also make tax saving investments through mutual funds. Mutual funds can be actively managed or passively managed. An actively managed fund has a fund manager who picks securities in which to put investors’ money.

4. Stocks

This includes shares of ownership of any company and helps you earn dividends in return. It is the most well-known and simple type of investment. When you buy stock, you’re buying an ownership stake in a publicly-traded company. Many of the biggest companies in the country are publicly traded, meaning you can buy stock in them.

5. Exchange-Traded Funds

Exchange-traded funds (ETFs) are similar to mutual funds in that they are a collection of investments that tracks a market index. Unlike mutual funds, which are purchased through a fund company, shares of ETFs are bought and sold on the stock markets. Their price fluctuates throughout the trading day, whereas mutual funds’ value is simply the net asset value of your investments, which is calculated at the end of each trading session.

6. Cryptocurrency

It is a fairly new investment option. Bitcoin is the most famous cryptocurrency, but there are countless others, such as Litecoin and Ethereum. These are digital currencies that don’t have any government backing. You can buy and sell them on cryptocurrency exchanges.

7. Commodities

Commodities are physical products that you can invest in. They are common in futures markets where producers and commercial buyers seek to hedge their financial stake in the commodities. Retail investors should make sure they thoroughly understand futures before investing in them.

8. Annuities

Many people use annuities as part of their retirement savings plan. When you buy an annuity, you purchase an insurance policy and, in return, you get periodic payments. Annuities come in numerous varieties. They may last until death or only for a predetermined period of time. The may require periodic premium payments or just one up-front payment. They may link partially to the stock market or they may simply be an insurance policy with no direct link to the markets. Payments may be immediate or deferred to a specified date. They may be fixed or variable.