A Snapshot of Investment TypesAugust 13, 2019
Choose What’s Right For You
Do you know the difference between stocks and bonds? Are you familiar with different types of funds? You don’t have to be an expert to make smart choices for your own investments. But it certainly helps to have some basic knowledge of the underlying investments in your portfolio.
Here’s a brief explanation of a variety of investment choices:
Stocks — When you invest in stocks, you’re buying shares in a company. The price of a stock generally moves up and down based on the performance of the company and other factors. Some stocks pay out dividends, a distribution of earnings to shareholders in the form of cash payments or additional shares of stock.
Bonds — A bond is basically an IOU issued by a company (or government). Bonds pay investors a predetermined interest rate after a set period of time. Generally, the lower the risk of default by the bond issuer, the lower the interest rate you’ll earn on the bond.
- Treasury bonds are issued by the U.S. government.
- Municipal bonds are issued by state and local governments.
- Corporate bonds are issued by corporations.
Mutual funds — A mutual fund includes a collection of stocks, bonds or other investments in one fund that’s managed by an investment manager. With mutual funds, you can invest in a diverse range of investments without directly buying stocks or bonds.
- Equity funds invest in stocks.
- Income funds invest in bonds.
Balanced funds include a mix of stocks and bonds.
- Index funds are designed to follow market indexes such as the S&P 500.
- International funds invest in foreign companies and assets.
- Specialty funds include investments selected in specific sectors such as health care, technology, real estate or commodities.
Exchange-traded funds (ETFs) — An ETF is a security that holds a basket of assets (stocks, bonds, commodities) similar to a mutual fund. However, an ETF trades like a stock on a stock exchange, with changing prices throughout the day.
Real estate investment trusts (REITs) — With a REIT, you can invest in real estate by purchasing shares in a company that owns, operates or finances income-producing real estate. Most REITs are traded like stocks. Another option for investing in real estate is to buy a mutual fund or ETF that invests in REITs.
Choose Your Lineup
Investing money always involves some risk, so it’s important to choose a portfolio that matches your risk profile, goals and time frame. A well-balanced portfolio may help you manage the risks of investing while helping you stay on track to achieve your goals.
Whether you’re new to investing or want to give your portfolio a checkup, one of our PeoplesWealth Advisors can help. Contact a member of our team today.Return to Blog