Investing can be intimidating for many as there are so many types of investment. Consequently, assessing which is suitable for one’s financial portfolio is challenging. In this investment guide, we will take you through some popular types of investment, from bonds to stocks and commodities. However, if you are serious about investing in any particular investment alternative listed below, research them. If required, consult a financial advisor who offers investment services.

Alternatively, you can read investment books to be well-versed in the investment basics and avoid making costly mistakes.

Stocks
It refers to an investment in a specific company. Share is a small piece of the company’s assets and earnings. Many public companies sell these shares in their business to raise capital. Investors can invest in them and sell these shares as and how they like. Some top-performing stocks yield high returns, while some even come with a high risk because enterprises may go out of business or lose value. Hence, it helps to be well-versed in the investment basics before investing money in stocks.

Broadly, people who put money in stocks profit when the stock value spikes and sell it at a profit. In addition, some shares also yield dividends, which are a regular distribution of the company’s earnings for investors.

Bonds
Buying a bond means lending money to a government entity or company. Bonds are financial instruments with a predetermined duration, and during this time, bondholders receive regular interest payments. The amount of interest payout depends on the interest rate set by the bond issuer at the time of issue. It is known as the coupon rate, which may be variable or fixed. The bond issuer repays the bond’s face or par value after the maturity date (when the set duration ends).

Compared to stocks, bonds are a stable type of investment, as they offer a steady income flow. However, since they are stable, they have a low long-term return than stocks. Please note that bonds are susceptible to several investment risks, such as repayment, credit, and interest rate. Knowing only the investment basics will not be fruitful with something like bonds. Hence, it is best to trust experts offering investment services for such risky prospects.

Gold and other commodities
Commodities like silver, gold, or crude oil are high-profit investments. People have long been investing in gold. However, it does not necessarily imply that gold is the best investment. But gold is a commodity. Hence, its fear and scarcity determine its price, usually influenced by environmental changes and political actions. So, when you put money in gold, you know your moat depends on external factors. Hence, price fluctuations can be extreme and rapid. Typically, the price surges when fear and scarcity are high and drops when such commodities are available in abundance.

Mutual funds
Mutual funds enable investors to buy a diversified portfolio of investments in a single transaction. These funds gather money from numerous investors and employ a professional manager for investment services. This manager strategically invests pooled money in different assets, such as stocks, bonds, or other financial instruments.

Typically, this investment follows a specific strategy. A fund might either invest in a line of bonds or stocks, such as government bonds or international stocks, or bonds and stocks. The mutual fund risk factor depends on the investments made within this fund. Anytime a fund makes money via bond interest or stock dividends, it distributes a chunk to the investors.