Different Types of Investments - The Basics

After blogging for the last ~9 months (just realised that it was my 9 months since I've started my blog last Monday), I've noticed that I haven't talked about the different types of investments and my thoughts about them so I thought that I should take one post to talk about it. There are a few different types of investments that you can make, investments into stocks, bonds, your own business, REITs, property, precious objects, etc. I'll just cover a few of them as basics in this post, there are others, just that they are a little more abstract to me or I may not have experience with them and would leave you to venture elsewhere for more info on them.

(Image source: thebluediamondgallery.com)

Fixed Deposits 

This may be the simplest investment option other than leaving your money in a savings account. You put your money in a fixed deposit for a set amount of time with the bank and get an agreed upon interest rate on your money.

Bonds

Instead of lending your money to the bank through fixed deposits and savings accounts, by investing in bonds, you are lending your money directly to businesses or governments. The bonds have a par value and a coupon rate and most also have a maturity date, when they will repay the par value of the bond. You will also get interest on the bonds on the payment dates which differ in frequency for different bonds (or just get the par value back for some bonds with shorter maturities).

Stocks

This is the investment which I cover most on this blog. When you invest in a stock, you are basically buying a small piece of a company that can be traded on the stock market. You get to take part in the growth (or decline) of the company through an increasing (or decreasing) share price as well as dividends which it pays out to its shareholders. While more risky than bonds, stocks have a chance to generate much higher returns, since the sky's the limit as long as the company is able to grow to reach it.

REITs

Similar to stocks in a way, by investing in a REIT, you get to invest in a portfolio of investment properties that the REITs hold. This is a cheaper and less time consuming way of investing in property than purchasing your own rental property as you are able to buy only a small share of the overall portfolio (this is where it is similar to stocks) and there are also property managers that manage the properties under the REIT for a fee.

Property

This seems quite straight forward like fixed deposits but require a bit more research and leg work. You invest in a property of your choice and get your returns from the rental income that it generates (minus any costs of renting out the property and taxes) as well as the capital appreciation when you sell your property.

Precious objects

These can be as diverse as art and wine to gold and silver. These objects have value mainly because of the value other people attribute to them. They don't give you rental income or pay you through dividends, their returns are instead obtained from the capital appreciation that you get from the time you buy the investment to when you sell it.

Summary

There are many ways to invest your money, with the varying levels of risk and different factors affecting each of them. So, it would be good to learn more about the different types of investments that you can make so as to increase your returns.

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