Investment Vehicle
Candlefocus EditorCDs, or Certificates of Deposit, are likely the most common investment vehicle. CDs are offered by banks and usually require a minimum deposit and term of the deposited funds. CDs offer virtually no risk to investors compared to other investment vehicles. Investors can also purchase bonds, which are loans issued by corporations or governments. Bonds generate a return on the basis of the interest payments they make throughout the life of the bond. Some bonds even offer tax-free returns.
Cash equivalents such as money market accounts and savings accounts are also suitable investment vehicles. These accounts offer generally low returns, but are extremely safe and liquid. These accounts are ideal for those investors who lack the time or interest in researching more complicated investment vehicles and who prefer to avoid any significant risk.
Lending investments, such as TIPS (Treasury Inflation-Protected Securities) and municipal bonds, are also safe investment vehicles. TIPS are a US Treasury security designed to protect against inflation, while municipal bonds are issued by local governments. Both of these types of investments generate returns through interest payments and help to diversify an investor’s portfolio.
Pooled investments such as pension plans, mutual funds, and hedge funds are also popular investment vehicles. These vehicles bring together investment capital from multiple investors and invest it in a variety of assets. Pooled investments offer the advantages of diversification and professional money management. They also come with higher fees and risks than more traditional investments.
Investment vehicles come in a wide variety of forms, each offering its own advantages and disadvantages. It is important for investors to understand the differences between each investment vehicle and the potential risks associated with them. With the right investment vehicle, investors can gain positive returns on their money.