Types of investments … continued

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Types of investments

Key Points

Bonds

Corporations, governments and municipalities issue bonds to raise funds. In return they typically repay the bond owners with interest. In this way, a bond is like a loan. When you purchase a bond, you are lending money to a corporation or to the government for a certain period of time called a term. The bond certificate is a promise from the corporation or government that they will repay you on a specific date, usually with a fixed rate of interest.

Why do people invest in bonds?

The main objectives of investing in bonds are current income and the potential for stability and future income. Bond terms can range from a few months to 30 years. The longer you hold your investment in bonds, the better the return – so consider bonds a long-term investment.

Is there risk in buying bonds?

Yes, like all investments, bonds involve risk. Government bonds are low-risk because they are backed by the U.S. government. Corporate bonds have a higher potential risk. You should research the company before you invest to make sure it has the ability to repay the loan.

Real Estate

Many people invest in real estate, such as a home or property. One positive aspect to investing in real estate is that it usually increases in value over time without the daily ups and downs that happen in the stock market. Like stocks, you earn money when you sell real estate for more than what you paid for it. Keep in mind that it can take time to sell a home or property, and that there are costs involved in buying, selling, and owning real estate.

The collection of investments you own is called your portfolio.
For more detailed information about different types of investments, click on Library.
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