Investment Basics: What You Should Know

Before investing, you must be as informed as possible about securities and markets. Furthermore, you must stay informed and monitor your portfolio when an individual purchases goods as an investment. The intent is not to consume the good but to use it in the future to create wealth.

What types of investment products are there?

There are many types of investment products, and some of them you can find below.

Stocks

Stocks give stockholders a share of ownership in a company. As a result, stocks offer investors the most significant potential for growth over a long period. As a result, investors who want to stick with stocks for a long period are rewarded with good returns.

However, stock prices move down as well as up. So there is no guarantee that the company whose stock you hold will grow and do well, and you can lose the money you invest in stocks.

Bonds

A bond is debt security. The borrower issues a bond to raise money from investors willing to provide the money for a certain period.

The bonds can provide a means of preserving capital and earning a predictable return. In addition, bond investments provide steady streams of income from interest payments before maturity.

Mutual Funds

A mutual fund is a firm that pools money from many investors and invests the money in securities, for example, bonds, stocks, and short-term debt. Investors buy shares in mutual funds. Each share represents the part of investor ownership in the fund and the income it generates.

Like other funds, mutual funds also carry some level of risk. Also, you may lose all the money you invest with mutual funds because the securities held by a fund can go down in value. In addition, dividends & interest payments may change as market conditions change.

Exchange-Traded Funds (ETFs)

Like mutual funds, ETFs also offer investors a method to pool their money in a fund that invests in stocks, bonds, and other assets and, in return, to receive an interest in that investment pool.

However, unlike mutual funds, ETF shares are traded on a national stock exchange and at market prices. Therefore, it may or may not be the same as the net asset value (NAV) of the shares, that is, the value of the ETF’s assets minus its liabilities divided by the number of shares outstanding.

Conclusion

Investment strategies are always considered important tool investors can use to have a firm hand. However, at the same time, these investment strategies can sometimes be hazardous for investors because the stock price depends on several other more practical factors than theoretical.

Finally, you may wish to consider seeking the advice of an investment professional. We at Royal West Agency understand your investment objectives and risk tolerance. Our professional team understands complex products and can explain to your satisfaction whether or how they fit your objectives.