common types of investments

investing for beginners

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Stocks, mutual funds, ETFs, oh my! What are some different types of investments you can make?

common types of investments

investing for beginners

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common types of investments

investing for beginners

Stocks, mutual funds, ETFs, oh my! What are some different types of investments you can make?

Ok everyone, we’ve talked about how the market works, some different investing strategies, how stock prices are determined…now is a good time to jump into the types of investments you can make.

 

Every type of investment we’ve discussed so far has been an individual stock…but there are more ways to invest than just individual stocks. Individual stocks are great, especially because the financial upside of a single stock can be high. But for those of us who don’t want to be following company news every minute of every day, worrying about the performance of their individual stock, there are other options out there that can help limit your risk (and limit the amount of time you have to spend staying 100% on top of your investments).

 

Mutual Funds & ETFs

Another key type of security that you need to know is called a mutual fund (and its cousin, the ETF). A mutual fund is a professionally-managed investment fund that pools money from investors and invests in many different individual stocks on your behalf. There are mutual funds of all different varieties, some that focus on industry sectors, some that focus on specific company sizes, some that focus on specific countries or regions. Mutual funds are great because you can diversify your risk (stay tuned for our lesson on diversification) and you can gain exposure to different types of investments you might not have previously considered. An ETF (or exchange-traded fund) is a similar type of investment, except they are not generally “actively managed” and just represent a basket of stocks that aren’t frequently bought and sold.

 

How a Mutual Fund Works

Let’s walk through how a mutual fund works. If you were to, say, invest $100 in a mutual fund that focuses on the tech industry, that mutual fund would allocate your money into a pool with all the other investors and invest it in a basket of tech stocks. So some of your $100 would potentially purchase Apple stock, some Square stock, some Microsoft, etc. Then the value of your investment would go up and down based on the performance of all those companies stock performances together.

You can research all the mutual funds out there by looking at sites like Morningstar. You can see all the companies they invest in, whether they’re pursuing a growth or value investing strategy, how often they buy and sell stocks, and read up on their fund manager’s investment thesis.

 

They may not be sexy, but you’ll see a lot of value in mutual funds the more you take a look.

 

Source(s): Investor.gov

Transcript

Ok everyone, we’ve talked about how the market works, some different investing strategies, how stock prices are determined…now is a good time to jump into the types of investments you can make.

 

Every type of investment we’ve discussed so far has been an individual stock…but there are more ways to invest than just individual stocks. Individual stocks are great, especially because the financial upside of a single stock can be high. But for those of us who don’t want to be following company news every minute of every day, worrying about the performance of their individual stock, there are other options out there that can help limit your risk (and limit the amount of time you have to spend staying 100% on top of your investments).

 

Mutual Funds & ETFs

Another key type of security that you need to know is called a mutual fund (and its cousin, the ETF). A mutual fund is a professionally-managed investment fund that pools money from investors and invests in many different individual stocks on your behalf. There are mutual funds of all different varieties, some that focus on industry sectors, some that focus on specific company sizes, some that focus on specific countries or regions. Mutual funds are great because you can diversify your risk (stay tuned for our lesson on diversification) and you can gain exposure to different types of investments you might not have previously considered. An ETF (or exchange-traded fund) is a similar type of investment, except they are not generally “actively managed” and just represent a basket of stocks that aren’t frequently bought and sold.

 

How a Mutual Fund Works

Let’s walk through how a mutual fund works. If you were to, say, invest $100 in a mutual fund that focuses on the tech industry, that mutual fund would allocate your money into a pool with all the other investors and invest it in a basket of tech stocks. So some of your $100 would potentially purchase Apple stock, some Square stock, some Microsoft, etc. Then the value of your investment would go up and down based on the performance of all those companies stock performances together.

You can research all the mutual funds out there by looking at sites like Morningstar. You can see all the companies they invest in, whether they’re pursuing a growth or value investing strategy, how often they buy and sell stocks, and read up on their fund manager’s investment thesis.

 

They may not be sexy, but you’ll see a lot of value in mutual funds the more you take a look.

 

Source(s): Investor.gov

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