In the world of investing, knowing in which asset to invest is one of the key decisions you will make. There are many different asset classes out there.
Each of them has their own News Media Platform unique qualities and benefits. They also have their own unique risks and disadvantages.
Here are some of the major asset classes you can invest in.
This is perhaps the simplest and the safest asset class to invest in. It’s very easy to understand, and you can be sure to get something back.
It lets you have an understanding of the interest you’ll earn. At the same time, it guarantees that you can get your capital back.
On the flip side, the interest you earn in this kind of deposit rarely beats inflation, which is the speed at which the prices of goods and services rise up.
Certificates of Deposit (CDs)
We can categorize certificates of deposit (CDs) as a kind of cash deposit.
It’s highly liquid, meaning you can convert it into cold cash almost any time. They are very similar to cash deposits except they offer higher interest rates than savings accounts.
The downside is that the money is locked up for a period of time. And sometimes, you might have to shoulder some penalties if you withdraw early.
Meanwhile, you can also invest Forex News in bonds. A bond is a simply a debt contract that represents a loan made by you as the investor to a borrower.
Usually, a bond will involve either a corporation or a government agency. Also, when the borrower issues the bond, it comes with a fixed interest rate to the lender in exchange for using their capital.
Moreover, you can easily find bonds in organizations and entities that use them to finance operations, purchases, projects, and other activities.
Interest rates have a lot to do with bond rates. Because of this, bonds gain high demand during times of quantitative easing or when the central bank of the country raises key interest rates.
Shares of stocks of a company let you as an investor benefit and participate in the company’s success through dividends and increases in stock prices.
In case of bankruptcy, shareholders will have a share of the company’s assets. Common stockholders get some voting rights during shareholders’ meetings.
Preferred stockholders, on the other hand, don’t have voting rights. However, they receive preference over common stock holders when it comes to credit and dividend payments.
Mutual funds are investment vehicles where more than one investor pools their capital together to buy securities.
But mutual funds aren’t really passive investments. Portfolio managers manage them. These managers allocate and distribute the pooled investments into different asset classes, such as those mentioned above.
Sometimes, mutual funds imitate the movement of an underlying index like the S&P 500 or Dow Jones Industrial average. These are mostly passive funds.
Actively managed funds, on the downside, are typically more expensive. You often have to pay yearly management fees and front-end charges, which can eat away from your capital.