The world of investing can often be confusing. So here we explain the four main types of investments you can choose from.
Cash
Cash investments include everyday bank accounts, high-interest savings accounts, and time deposits, which typically offer the lowest potential returns among the four different types of investments.
However, it is always good to have a good amount of cash on hand in case of rain. It is safe, and although it will lose value over time due to inflation, it can play an important role in providing liquidity if there is a downturn.
Fixed Interest
One type of investment that many investors may be familiar with is bonds. This is a loan that the government borrows from willing investors with the promise of repayment at a fixed interest rate.
Bonds are considered a defensive investment because they generally offer lower potential returns and lower risk than stocks or real estate. Government bonds are not the only form of fixed-income investment, but they are probably the safest and virtually guarantee a fixed interest rate for the specified period.
Real Estate
Real estate is considered a very risky growth investment. This is because prices in the real estate market can rise or fall significantly over time.
One can invest directly, by buying a property, but also indirectly, through a real estate fund.
Shares
Stocks are considered a growth investment because they can help increase the value of your initial investment over the medium to long term. If you own stocks, you can also receive income from dividends when a company shares some of its profits with investors.
Although the stock market may slump and the value of stocks may fluctuate, the market has generally always gone up. In the past, the stock market has returned an average of 10% per year.
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