These days people tend to say that the younger generation just need to work harder, however, most are still struggling to get by. Wages don’t match inflation, and with prices going up, living is just one big payout, and not to you!
So, what do people do? They look at other ways to get that extra cash, perhaps save for a better pension. Investing tends to be the way people go about getting in that extra cash. If you want to learn more about hustling that extra cash in, click here.
Want to learn more about investing, the different types, and how they can benefit you? Stick around a while!
The Types Of Investing
Understanding the different types of investing is the first stepping stone for any beginner wanting to work their way into the world of investing. There are countless lists of the different investments you could make.
However, there are different classes and every type of investment will fall into one of these. Asset classes are made from investments that have similar or the same characteristics. They will also have similar regulations financially.
Understanding Asset Classes
The classes most of us are similar with are stocks (or equities), cash/ cash equivalents, and fixed income investing. However, there are other classes that may be of interest to you such as commodities and futures, and let’s not forget alternative investing as well.
What Is Equity Investing?
Investing in equities is the buying and selling of stocks. This is usually the go-to thought when you think of investing. Publicly traded companies will often offer investors equity interest in companies via shares. By doing so, they raise their capital to help expansion.
Investors in stocks can buy stocks in order to profit from increases, and they can sell to gain from decreases. You can also try to gain profit from dividends as well.
Stock prices are determined by how the company is doing as well as the overall industry and the economy.
What Is Fixed Income Investing?
This type of investing is in relation to debt securities that offer fixed-rate interest payments over a time frame. These are often known as ‘bonds’. It is a massive worldwide market thanks to huge government debts.
If you buy a bond then you essentially give a company financing and in return you get an interest rate. You get interest on the bond over time. Some investors hold bonds until they mature.
Those who do this often find that the fluctuating yield will have no real impact on their returns. Yield rates only come into play when you buy or sell in a secondary market before it matures.
What Is A Zero-Coupon Bond?
Bonds can also be issued as ‘zero-coupon’. So, instead of offering regular payments, they are sold at a discount from the face value of the bond. Investors who do this will make a return by buying bonds for a smaller face value and then gaining when it has matured.
So, this type of bond may have a value of $5k at face, but it sells for $4.5k. You pay $4.5 for the bond, and then at maturity you sell or redeem it for $5k making a 10% return upon your investment.
It is mathematical, but anything in investing is.
What Are Bond Sellers?
Then there are bond sellers. These are sold by state, municipal governments and nations. They are popular because they gain interest without tax. Government bonds and corporation bonds are used for these governments to gain financing.
Corporate bonds often pay higher rates, but they are more volatile.
These investments are often attractive to those close to retirement and have gross amounts of capital from investing from their years working. These investors have the ability to buy large bonds and collect interest while they work, gaining back the mature value upon retirement.
What Are The Other Asset Classes?
Now, there are also alternative investments, these can include real estate, collectables, gold, oil, and so on.
Alternative assets like commodities will have more leverage, and you can use small amounts of capital to have control over a large investment.
You can basically make a lot of money with just a bit of money. Yet, leverages apply to outcomes that are positive and negative, as they can bring about gross profit, they can also bring about gross losses too.
Investing in this way does require careful money management. In stocks, you won’t lose more than you put down, but with alternative investments, you can lose more.