Investment can be defined allocating money to assets with the hope that in the future it would provide some benefit such as generation of income. Property and gold are some common examples of the traditional type of investment. The value of property, gold, mutual funds and shares bought today may see a significant increase in the future.
In the financial industry, investments can be bifurcated into two broad categories, namely traditional and alternative.
This is the most popular category of investments which is done by the individual as well as corporates to yield benefits. The following types of investments can be listed in this category.
The bonds are generally issued by the corporates to raise a higher amount of money, which the banks are incapable of lending. The lender receives a return on its money which he lends to the borrower, i.e corporates.
Stocks are also known as equity shares, which are issued by the business organization to the general public for raising funds. Stock entitles the shareholder the ownership of the company. In the exchange of money which the business organization receives, the shareholder receives stock certificates.
C. Short term/Cash
Money is invested in short-term, low-risk deposits like certificate of deposit, money market funds or high yield bank deposits. Here the amount invested can be converted to cash at any point of time.
D. Mutual Funds
A mutual fund can be defined an investment scheme that is professionally managed. These schemes are operated by asset management companies where the money of a group of people is invested in bonds, stocks, etc.
E. Fixed Deposit
This is one of the oldest and safest ways to save money in which a fixed amount is kept aside with financial institutions like banks for a fixed number of days, months or years. The rate of return on the money differs with the different timelines which the investor chooses.
The investors go for various other options beyond stocks and bonds which are investing in acquiring jewellery like gold or other precious stones and metals. Cryptocurrency is another emerging investment option in the modern day.
Thus, investment turns out to be the most important financial decision which each individual or organization has to take in order to yield maximum benefits or profits from the money which is lying unproductive.