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|Do you know the different types of investment? by domswashy: 4:57 pm On September 25, 2020|
There are four main types of investment, or classes of assets, that you can choose from, each with distinct characteristics, risks and benefits.
Once you are familiar with the different types of assets, you can start thinking about putting together a mix that fits your personal circumstances and your risk tolerance.
Investments in Growth
They are more suitable for long-term investors who are willing and able to withstand ups and downs of the market.
Shares are considered a growth investment as they can help to increase the value of your original investment over the medium to long term.
If you own shares, you may also receive income from dividends that are effectively part of the profits of a company paid to its shareholders.
Of course, the value of the shares may also be lower than the price you pay for them. Prices can be volatile from day to day, and shares are generally best suited to long-term investors who are comfortable with these ups and downs.
Also known as equities, shares have historically yielded higher returns than other assets, shares are considered to be one of the most risky types of investment.
Property is also considered to be a growth investment because the price of houses and other properties can rise substantially over the medium to long term.
However, just like the shares, the assets can also fall in value and bear the risk of losses.
It is possible to invest directly through the purchase of a property, but also indirectly through a real estate investment fund.
They are more focused on generating income consistently than on growth, and are considered to be lower risk than investment in growth.
Cash investments include bank accounts on a daily basis, high interest savings accounts and term deposits.
Typically, they have the lowest potential returns of all types of investment.
While they do not offer a chance of capital growth, they can deliver regular incomes and play an important role in protecting wealth and reducing risk in the investment portfolio.
Fixed interest rate
The best known type of fixed interest investment is bonds, which are essentially when governments or companies borrow money from investors and pay them a rate of interest in return.
Bonds are also considered to be defensive investments, as they generally offer lower potential returns and lower risk levels than shares or assets.
They can also be sold relatively quickly, like cash, although it is important to note that they are not without the risk of capital losses.
With the above lines, you’ll now know the different types of investment to key into.
Feel free to drop your questions. NairaForum is here for you.
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