Investment Product
Candlefocus EditorStocks: Stocks represent ownership in a company. As the company grows, so does the value of the stock. Stock enjoys the greatest potential for both capital appreciation appreciation and income (divided payments). Stocks are considered high risk, as they are heavily impacted by the market, volatility and the specific performance of the company they represent.
Bonds: Bonds are also known as fixed income securities. They are used by companies and government entities to raise capital. Bonds are a debt instrument. In return for committing capital, the issuer agrees to pay the bondholder a pre-determined rate of return for the entire duration of the bond. While the return is pre-determined, there is risk of default.
Exchange-Trade-Funds (ETFs): ETFs pool the investment dollars of many buyers, allowing for greater diversity and buying power than direct investment. ETFs are bought and sold on the stock market, much like a share of stock. Their value rises and falls in-line with the underlying assets. ETFs allow investors to have access to many different securities in a single purchase.
Mutual Funds: Mutual funds are similar to ETF's in that they pool the investment dollars of many buyers, allowing for greater diversity and buying power. They are actively managed by fund managers, who make decisions on where to allocate the funds within their portfolio. Mutual funds tend to be a mix of many assets and contain a mix of stocks, bonds, and other securities. They usually have lower costs and greater minimum investment amounts than ETFs, but may have higher fees.
Real Estate: Real estate can be a great way for investors to generate income, capital appreciation and even tax advantages. Investing in Real Estate can come in the form of rental property, land or investment in real estate investment Trusts (REITs).
Commodities: Investing in commodities can either be a speculative or passive investment. As commodities are physical assets that come from finite sources, the price can increase as demand rises and supply diminishes. Commodity investors typically take a highly speculative stance, not only betting on the future price action of a particular asset, but also on the future projections of currency, inflation and the economic climate.
Investment products are an essential part of an investor's portfolio. They can be used to diversify your portfolio, generate income, and provide capital appreciation. As each investor is different, it is essential to do your due diligence and truly understand the risk/reward associated with each potential investment product. This will allow you to make informed decisions and build a portfolio suited to your risk tolerance, investment goals and needs.