One of the greatest ways to grow your wealth is through investment vehicles. When you invest your money, you’ll be able to take advantage of the compounding effect and even generate passive income.
An investment vehicle is a product that you can use in order to generate positive returns. Investment vehicles that come with low risks include bonds and certificates of deposit (CDs). You can also utilize vehicles that come with greater degrees of risk, such as futures, options, and stocks.
Other kinds of investment vehicles include collectibles, exchange-traded funds (ETFs), mutual funds, and annuities. If you’re interested in learning more, then keep on reading and we’ll walk you through everything you’ll want to know!
- Ownership Investments
People who make use of ownership investments own certain assets that they expect will grow in value. Ownership investments include businesses, precious objects, real estate, and stocks.
Stocks, also referred to as equity or shares, give owners a stake in a company and its gains and profits. People who invest in real estate can rent or sell their properties in order to receive higher net profits.
Precious objects can include precious metals, art, and collectibles. If these objects are sold for a profit, then they can be considered as ownership investments.
Capital that’s used to build businesses in order to provide services and goods for profit is another kind of ownership investment.
- Lending Investments
When it comes to lending investments, people let their money be used by a different person or organization with the expectation that they’ll be repaid. The lender usually charges interest on their loan so that they can earn a profit after the loan has been repaid.
This kind of investment doesn’t come with a lot of risks and usually provides low rewards. Examples of lending investments include Treasury Inflation-Protected Securities (TIPS), CDs, and bonds.
People who invest in bonds let their money be used by the government or businesses with the expectation that it will be paid back with profit after a certain amount of time with a fixed interest rate.
CDs are offered by banks. A CD is essentially a promissory note provide that locks a person’s money in a saving’s account for a certain amount of time with a higher rate.
- Pooled Investment Vehicles
There are some instances where several investors will pool their money in order to gain certain advantages that they wouldn’t get if they just invested individually. This is referred to as a pooled investment vehicle and can take the form of:
- hedge funds
- unit investment trusts
- private funds
- pension funds
- mutual funds
With a mutual fund, a professional manager chooses the kind of bonds and stocks that should make up the client’s portfolio. No matter which kind of investment vehicle you choose, it’s important that you go into it with a tax strategy in mind.
The Importance of Knowing About the Different Types of Investment Vehicles
By knowing about the different types of investment vehicles, you’ll be able to make more confident and educated decisions when it comes to your finances.
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