Thursday, May 26, 2011

Types of Investment Instruments

There are many types of investment instruments available in the market. To select the most suitable investment for you, you have to know the character of each instrument.

In general, bonds are debt securities issued by companies or governments. When buying bonds, you lend money to the issuer.

In return, publishers will give you interest on your money before, and eventually return all the money you lend. Factors of interest paid regularly (every 3 months-6 months) that makes the bonds into fixed-income investment group.
The attraction of bonds is that it is relatively safe. But, there was security costs. Because the risk is low, the potential benefits are also not very high bond. Generally, bonds lower rates of return than other instruments.

When you buy shares in a company, you will become owner of the company. Therefore, you also have the right voice in shareholder meetings. In addition, you are also entitled to receive benefits that are allocated to company shareholders. This is what is called a dividend.

If the bonds provide a regular flow of income, profit shares are highly volatile. Please note, if you buy stocks, you do not get any warranty. In fact, sometimes even no dividend stock. In this case, you can only expect a profit (capital gains) from rising stock prices you buy. However, the increase in stock prices is also not always the case.

Interestingly, stocks provide relatively higher profits compared with bonds. But, of course there are risks: all of your investment may be lost.

Surely, you must know in advance about the bond and stock investment instruments. In essence, the bonds provide a regular income stream and keep the form of interest. In addition, bonds are also relatively safe, especially if the bond issuer is the government. But, profits bonds are relatively low compared to other investment instruments.

In addition to stocks and bonds, investors can also raise money in mutual funds. Investment instrument offers many advantages. In addition to the initial capital needed is not too large, investors also need not spend much time staring at the investment. It's so, you also can not be experienced. If mutual funds disappoint, you can also try out alternative investment instruments.

Meanwhile, when buying stock, you become the owner of the company that issued the shares. Benefits can share a profit sharing or dividends and rising stock prices. When compared with bonds, stocks gain is relatively higher. However, the risks, benefits of these shares can fluctuate daily. Additionally, your initial investment capital can also be scraped out.

Mutual funds are a collection of stocks, bonds or other instruments. When you buy mutual funds, you collect your money together with other investors. So, as a group you and other investors to pay the investment manager to manage the collection of funds. Based on its investment focus, there are many kinds of mutual funds. There are stock mutual funds, bonds, mix, money market, protected, and index mutual funds.

The advantages of mutual funds is that you can invest your money without having to spend time or experienced first. Theoretically, the benefits of your investment would be higher if you turn them over to a professional than if you invest it themselves.

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