There are many investment instruments for you to choose from. The most popular include:
Stocks
- A stock is a share of ownership in a company. Stock prices move based on investors’ evaluation of the company’s performance, including leadership changes, new product releases or how it’s doing financially.
- Companies issue stock to the public to raise money to grow or pay off debt. Stocks are also known as equities.
Bonds
- A bond is essentially a loan to a company or government entity, which agrees to pay you back in a certain number of years. In the meantime, you get interest.
- Bonds generally are less risky than stocks because you know exactly when you’ll be paid back and how much you’ll earn.
Mutual funds
- A mutual fund is a mix of investments managed by an individual company. When you invest, you don’t choose specific stocks or other securities; the mutual fund does it for you. The inherent diversification of mutual funds makes them generally less risky than individual stocks, but there are mutual funds available at all risk levels.
- Popular mutual funds include index funds, which follow the performance of a particular stock market index, and money market funds, which invest in short-term, low-risk assets.
Exchange-Traded Funds (ETFs)
- An ETF is a basket of securities — stocks, bonds, commodities or some combination of these — that you buy and sell through a broker. They combine the diversification benefits of mutual funds with the trading ease of stocks and are available at various risk levels.
- Index funds are also common among ETFs — and they generally carry lower associated management fees than mutual funds.
Regards,
Adrian
Tax Consultant
