What is investing? An investor commits their own capital towards something else in order to make a profit. There are many investment instraments that we will discuss on this page. We provide you with a detailed analasis on other pages of each investment type. We want you to make an informed desisions on the sutability of an investment for you.
Before most people study investing, what do they think? Most people believe two things. One train of thought is investing will make you rich. The second train of thought is investors lose lots of money. The real
The real reason why you should invest is to achieve a financial goal. You can actually have a many different investing goals. The goals we focus on the most are building wealth, building alternative sources of income, and asset protection. You can have a different goal as an investor. The important idea is that you have a goal.
The investment options are vast as you will see on this page. There are many ways investors achieve their goals. Stocks are only a small portion of the investment options available; however, the sexiest part of finance is the stock markets, so they get the most attention. We show you all your investment vehicles on this web site. There are other great ways to achieve your investment goals.
List of Investments
Purchasing equities is directly purchasing ownership in a company, cooperation, or private businesses. Common stock is a unique class of stock because it comes with voting rights. Another benefit is that common stock doesn’t have a maturity date or expire. The worst thing that can happen when you own common stock it that you can lose what you originally invested. (Yes, that is a good thing. There are investments that you can lose more than you originally invested.)
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A cooperate bond is a loan to a business which is different than buying equity. Companies of all sizes issue bonds for investors to purchase. You might be wondering why don’t cooperation’s go to a bank for a credit line like we do for our auto loan or home mortgage? Imagine the size of some of the cooperation’s that are global leaders. Companies such as Apple or Google are so large in size that it would be impossible for them to get a loan or credit line from a single person or institution. This creates a cooperate bond market for investors to purchase notes from cooperations.
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This is a distinct class of stock issued by cooperations. The preferred stock class can be difficult to define. We define preferred stock as an equity and bond hybrid because it shares booth their characteristics. The largest benefit to buying this class of stock vs common stock is the fact that you get your dividends before any common stockholders get their dividends. The characteristic that makes preferred stock better than bonds is the tax advantage of receiving qualified dividends. This makes them less risky than common stock and more tax friendly than cooperate bonds.
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A municipal bond is issued by states or local governments. They do this for similar reasons a cooperation does. They need to borrow money in order to build large scale projects. Cities will borrow funds in order to invest in new schools, road projects, or any other type of large structure that benefits society. The benefit to a municipal bond vs a cooperate bond can be the tax advantage that comes with owning them. On the federal level, you will not have to pay tax on the interest income you get from a municipal bond.
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Mutual Fund and ETF’s
Mutual funds and ETFs are pools of money that are combined together with an unlimited number of investors. The strategy behind this is to get a large pool of funds together to help investors and traders diversify. The reason why mutual funds and ETF’s are grouped together is that they are similar in many ways. The main difference is that mutual funds are open-ended funds and ETF’s are close-ended funds.
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(REIT’s) Real Estate Investment Trusts
Real Estate investment trusts (REIT’s) are misunderstood by most investors and traders. The fundamentals of REIT’s are difficult to analyze because it is a different type of asset. A REIT is a pool of real estate that allows you to become a real estate investor without a large sum of money. REIT’s can be a profitable investment is you understand the fundamentals. These are different than regular equity investments, so REIT’s belong in an investment class of their own.
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You can trade raw materials known as commodities. A raw material is a good that isn’t manufactured. This is divided up into smaller subsections such as agriculture, livestock, energy, and metals which are normally traded in futures contracts or on the spot market. Although most people don’t invest in commodities, they are good to learn about. They teach investors about supply chains and market demand.
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The Forex market is a one trillion dollar marketplace. A Forex trader is a currency trader that buys and sells currency pairs to make a profit. You can make an investment in the Forex Market. We think FOREX is for traders because it is extremely fast-paced and volatile nature of this market. The Forex market is a great place for swing and day traders. There are investors in the FOREX market; however, more of them are active participants.
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Derivatives are a really broad term used in the investing and finance world. A substance that is made from another substance, is a good way to define derivatives. This investment and trading vehicle has unlimited possibilities. There are some derivatives that you can invest or trade such as futures or stock options. Other derivatives are more complex like mortgage-backed securities that are traded by instatutional traders only.