Types of Investments

Each type of investment can be categorized into an asset class, which has specific features as to both danger and possibilities. Knowledge of these options will enable you to come up with a balanced investment portfolio.

Equities

Equities also known as stocks are corporate instruments that give the holder a claim on an organization. Other advantages of investing in equities include; Investing in equities means that you are an interested party in a company’s growth and profitability.

• Pros: High potential returns, dividend income, and liquidity.
• Cons: High volatility and risk of capital loss.

Equities on the other hand are the best for investors looking forward to earning capital growth. Some examples are broadly categorized stocks such as large growth stocks, small value stocks and concentrated stocks in a particular industry.

Bonds

Bonds are a type of debt instrument which is issued by government or municipal authorities or a corporation. They are actually financing which Investors make to the issuer company.

• Pros: Predictable income, lower risk than equities, and portfolio stability.
• Cons: Lower returns compared to equities and vulnerability to inflation.

Bonds can be taken by low risk seekers or as a fix to conclude a risky equity portfolio.

Mutual Funds

Mutual funds collect money from several investors and use it to buy several stocks, bonds or other securities. They are under the administration of professional fund managers.

• Pros: Diversification, professional management, and accessibility.
• Cons: Management fees and potential underperformance of actively managed funds.

They turn out to be very beneficial to individuals who wish to invest in a number of different classes of securities without having to halt active management of each one.

Real Estate

Real estate investments refer to the buying of other pieces of land, buildings, or investing in real estate investment trust companies.

         Pros: It comes with rental income, a hope of capital appreciation, and acts as a   good inflationary hedge.

         Cons: These are mainly capped by a high initial cost which leads to illiquidity and management of properties.

Real estate is considered the investment option for people who are looking for the long term appreciation of hard assets.

Alternative Investments

Non-traditional investments refer to investments that are not easily classifiable in traditional investment types and classes they include are private equity investment, hedge funds, investment in commodities as well as the newly renowned cryptocurrencies.

Pros: Two main benefits of investing in mergers and acquisitions from the acquirer’s side, namely high potential returns and portfolio diversification.

Cons: The industry is characterised by high risk, limited liquidity and more complex structures.

The right candidate to invest in these investments is one who is experienced and has a higher risk appetite and who seeks to expand from fixed assets and stocks.

Steps to Start Investment Management

Investing for the first time can be daunting, but when an organized pathway is followed it becomes an easy task. From that perspective it cannot be stated clearly enough that no matter at what stage you are in regard to investing, these steps will help direct your investment management in the right direction. Basic steps related to one’s financial position that might help to achieve the important goal of wealth maximization include realistic goal setting, constructing of portfolio, financial self-auditing, and ongoing evaluation.