To be an investor is to put money into an investment with the hope of a return/profit in the near future. Simply stated, to be an investor means owning an object or an asset with the intention of making a profit from the investment through the increase of the value of that asset over a long period of time or an appreciating value. The object or assets on which profits are made may be equities in a company, commodities, land, shares in an organization, gold or silver coins, bonds, mutual funds, insurance, bank accounts, and private equity. There are many more investment options than these but the point is that the purpose of the investment is to create a profit that will eventually be realized.
A bond, as an example, is a contract between two parties that guarantees that payment will be made when needed. Bonds may also be sold for longer periods of time and for a smaller cost. They are different from other investments because, unlike stocks or mutual funds, bonds are guaranteed by the issuing government or bank. Since the principal amount of the bond itself is not repaid until a certain amount of time has passed, the longer the duration of the investment, the lower the costs.
However, some bonds carry a high risk of loss, especially in today’s down markets. Some bonds are issued by the Federal Government, which are known as Long-Term Bonds. Long-term bonds are usually interest rate stabilized. An example of this would be a Treasury Bond – a long-term obligation issued by the U.S. Department of the Treasury. The interest rates of Treasury Bonds follow the U.S. Dollar Index, which is very predictable.
Another type of investment that is different from stocks and bonds are real estate investment trusts, or REO investments. These are an attractive option for investors who prefer to have a low risk-high yield investment portfolio. Real estate investment trusts are made up of property purchased at auction, through a trust deed, or through private investment. These investments typically offer higher returns than stocks and bonds, but have a high level of risk.
Other types of investments include certificates of deposits (CDs), money market funds, and short-term investments such as gilt bonds, swavel accounts, and CDs at banks. CDs are popular for their safety, as they are not traded on stock exchanges. Money market funds offer higher interest income than traditional savings accounts. Also available are certificates of deposit products such as term CD’s, business and government CD’s, and even corporate bonds. Lastly, some financial institutions offer certificates of deposit products that are backed by federal Treasury bonds, which offer higher interest income than standard certificates of deposit products.
One type of investment that is frequently overlooked but a potentially effective way to enhance the value and security of your portfolio is real estate investment trusts. These are an attractive choice for people who prefer to have a low risk-high yield investment portfolio. Similar to bonds, these investments come in various forms, including single family homes, commercial real estate, vacant land, and vacant lots. As with all investments, there are advantages and disadvantages to each type of investment. However, many experts recommend that you choose one investment option based on its potential return and ability to maximize your portfolio without requiring higher risk.