Understanding Investments

Category: Investment 83 0

When it comes to generating income, there are two types: active and passive. We earn active income through our jobs at the office, as a freelancer or any other work that requires plenty of our hours.

Passive income, on the other hand, can be generated through investments. Invest wisely, and you will be able to see a return on your investments after a certain period. Below, we discuss several forms of investment that you can make.

Stocks

When you purchase a company’s shares or stocks, you are buying a small part of that company. As such, when it gets its profit, you might be given your returns.

These returns are known as dividends. It the stock prices rise, you will see a profit should you decide to sell them.

Bonds

You might know bonds as fixed interest investments. By lending your money to a particular
company, council or even the government itself for a pre-agreed duration, you will be paid in interest.

Choose who you invest in bonds with wisely, since the bonds may drop or increase depending on the party issuing it. Unlike fixed-term deposits, you can withdraw or sell your bonds prematurely.

Mutual Funds

You can purchase shares and redeem your returns directly from a company’s mutual funds.
These funds are pooled together by investors.

The investments for mutual funds are made in a pre-agreed strategy. The investment fund itself will need to be registered with the Securities and Exchange Commission in advance to ensure proper regulations are maintained.

Real Estate

Any returns that you gain from the properties you have such as rental income, home value
increment and re-sell value are known as your capital gains.

Properties tend to grow in value over time. However, property investments need to factor in paid interest throughout the mortgage payments to accurately calculate its potential capital gain value.

Cryptocurrency

When you invest in cryptocurrency, a single unit of its currency that you purchase and keep could be worth more than thousands of dollars in your physical currencies. Bitcoins are the most frequently used cryptocurrency.

Should cryptocurrency one day replace any other forms of bank reserves or become an international trade currency, the value could even go up to tens of thousands of dollars quickly. However, the future of cryptocurrency is still unclear as of now.

Insurance

Yes, even life and health insurance can be an investment. There are different types of life insurance to cover your needs along the way, and you can choose the insurance of a specific objective to best suit your purpose.

As an example, long-term care insurance has measures to help you better manage your health care expenses as you age.

Cash Equivalent

These investments allow you to secure your original investment value and give you access to it
anytime, but the returns are much smaller than other forms of investments.

Examples of cash equivalent investments include your savings accounts and certificates of deposits.

These investments are certainly not the way to go if you are planning to make long-term investments for your retirement.

Venture Capital

When you invest in a start-up company or a small business by providing them with some money to expand, you might obtain your returns should the business successfully grow.

At times, you might be considered as a business partner within the company, earning the right for you to make some business decisions as well.

Precious Metals

When you think about precious metal investments, you might be thinking about gold, precious stones, and other similar metals.

Like properties, these precious metals are relatively stable investments with growth over time. However, the initial investment costs may be a lot higher than purchasing shares or insurance.

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