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7 Most Common Types of Investments

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Let’s say you’ve finally started earning some decent money. You are no longer struggling to pay your bills, but instead, you can finally think about creating a small stash on the side. As you start making more and more, you will probably start asking yourself, is there some way to increase these savings?

There certainly is! Aside from passion asset investment, you can consider one of the seven most common types of investments. Things such as real estate and stocks are a good way to increase your wealth but also to counter inflation. If you properly manage personal resources, not only do you have a chance to lead a better life but also to retire early.

1. Commodities

In the world of investing, the word “commodities” can refer to many different things. All these resources can be broken down into 4 major categories: livestock, energy, metals, and agriculture. Each one of them can be further segregated into things such as crude oil, cattle, wheat, silver, copper, etc.

When we talk about trading commodities, we commonly refer to financial instruments called futures. Most investors will purchase these assets and try to make money off of price fluctuations. Besides financial instruments, you can also purchase gold bars and other tangible assets.

2. Stocks

Stocks are the most common investment in the world. You can buy them in almost any country, and by purchasing enough of these assets, you can even gain control of a company. Alternatively, stocks can provide periodic yields known as dividends, or you can make money off of price differences.

When you buy a stock, you’re betting that the value of a company will rise in the upcoming period. Ideally, you should get them when the company is still young and has a high upside. As the business starts maturing and increasing its sales, this will be reflected in the stock value. Once the stock is high enough, you can sell it for an enormous profit.

3. Real Estate

Investing in real estate is another great option. Those who have enough resources can buy a property and build a building. However, most people will buy apartments so they can rent them. In the last few years, Airbnb has also become popular, allowing you to make extra money with some additional work.

Another great idea is to buy a rundown property and refurbish it. If you’re a contractor or if you can get these repairs done at a low price, you can make a lot of money by upselling the newly restored house.

4. Bonds

After stocks, bonds are the second most common financial instrument. Unlike stocks, which are regarded as ownership assets, bonds are classified as debt assets. In other words, when you purchase a bond, a company promises to pay off the full value of an asset at a specific date with a premium.

Bonds are regarded as much safer investments compared to stocks. They are ideal for risk-averse investors or people who just want to make some extra money. However, keep in mind that you can still lose on these instruments. For example, if a company defaults, they won’t be able to pay off their debts, and you will be stuck with a worthless piece of paper.

5. Cryptocurrencies

Cryptocurrencies are relatively new investments. A lot of traditional investors are skeptical regarding these assets just because the market is not stable enough. Furthermore, we don’t know much about cryptocurrencies, which is a frightening thought for conservative investors.

However, the fact there are so many unknowns surrounding cryptocurrencies is the very thing that makes them popular. You can basically lose all your money on them but also make enormous profits.  

6. Mutual Funds

As the name somewhat implies, mutual funds are created when numerous investors put their money into one fund. Pooling resources into one pile makes it easier for the managers as it allows them to control numerous client accounts through a single fund. They will invest in different financial instruments trying to beat the market.

Mutual funds provide fund managers with other flexibilities. Among others, the high amount of resources allows a high degree of diversification, potentially reducing inherent risks that come with investing in just one or several instruments.

7. Retirement Plans

If you’re getting close to retirement, you probably don’t want to risk it too much with stocks or cryptocurrencies. Instead, putting money into a retirement plan sounds like a much better proposal. For example, most people will go with a retirement plan available at their workplace, but you can also choose an individual retirement option.

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