Investing is simply buying assets having in mind that they will increase in value and earn you some good profit in the future. In the financial world, investment is more of buying securities, stocks, and real estate among other assets of value to make a profit in the future. If you happen to buy an asset at a low price and anticipate selling it at a higher price, that is investing. The return on any investment that you make is always known as a capital gain. When the value of your investment becomes higher than when you bought it, that can also be called appreciation.
The types of investments
Before you get started with investing, it is very important to know the basic types of investments. There are four classes of assets that investors can invest in. They include stocks, commodities, bonds, and real estate investments. Apart from the mentioned, there are also other investments such as exchange-traded funds and mutual funds. Here is a breakdown of every type of investment according to AG Morgan Financial Advisors
The first type of investment that is very common and that many people go for is stocks. Many companies out there sell their stocks as a way of raising funds for their business. When you buy stock or shares to a company, you are simply buying partial ownership of a business or a company. This simply means that when you won stocks to a company, you will be participating actively in its gains and losses. Some stocks always pay dividends especially when the company is profitable. Stocks are riskier than any other type of investment because there is no guarantee that the company you invested in will still be there in the future. Therefore, you need to be very careful when you are buying stocks.
The second types of investment are bonds. When you buy bonds, you are simply allowing yourself to be a bank. In case companies need capital, they can borrow money from investors. The debt issued by investors is what is known as bonds. This simply means that when you go the bonds way, you will simply be loaning money to companies or even a bank for a certain period. Many investors out there earn a lot of money from bonds but one needs to research a lot before investing in bonds.
Commodities are simply energy products, agricultural products, and even metal products. The mentioned are simply raw materials that can be used in industries and they are always priced according to demand. Commodities can be a very risky type of investment and investors are required to do a lot of research, identify a gap, and know the risk involved before investing. This is most important especially when you are planning to invest using loan funds.
Real estate is a very interesting area of investment. You can buy a home, buy land, or even build. Although it is profitable, it is also high risk. Therefore, investors need to be very careful while making decisions.