All of us know about investments and those who don’t know it very well must know that investment is any asset, any property or anything that you own which is likely to give benefit in the future. People have investments with the hope that it will generate income I the future. Investment is basically a long term plan. People in business have a lot of investments in different firms or some of them a=have all of their asset invested in only one of them. When we invest money in some business we actually become a partner of that business, now the choice is ours that either we want to be a silent partner or an active one. To make an investment you not only have to put money in a business but you can make an investment of your own and for that, you should know about the type of investments.
Types of investments
To make and investment you should know about the type of investment you are going to make and below are the type of investments to make you understand it better.
There is basically three type of investments which are further explained with examples.
Ownership investment is one of the most important types of investments and the following examples will make you understand it better.
- Stocks are the ownership investments which means that you own the portion of a company you invested in. It gives you a contract that makes sure you are the part-owner of the company. When you buy a share of a company it uploads record profits which make other people want to buy shares of that particular company and thus the value of your share increase it to making you get profit in case you decide to sell those shares.
- You can also buy shares of a running business and be a silent investor so you will be able to receive your share of the profit.
- You can also buy a real estate or any house and that would be an investment too and it is the most common type of investments. When the market value of your house increases which happens all the time with real estate you can sell it to gain profit.
- You can also buy other stuff like Gold, gems and famous painting as an investment and can sell it as their value increases when you want to extract your profit or when you get the highest bidder for that object.
Lending investment is the less dangerous type as compared to the ownership in all type of investments. Example of this type of investments are following
- Bond is less risky than being a stock shareholder because in stock if company go through a loss you go through with it too but in the bond, you keep receiving your profit which is less as compared t in stock.
Having a saving account is also a type of investment in which you loan money to the bank and your money is safe in this case.
This is the only type among all type of investments which is as good as cash and you can convert is back to the cash.
- Money market funds are cash equivalent type of investments but in this case, the profit could be as less as 1% or 2%. You can easily draw the cash out of it.