Saturday, May 26, 2012

Different Investment Vehicles


Usually when you think of investing, you think of public stocks. But there is a lot of different available financial instruments available. The reason stocks are popular is because they are interesting and can have lucrative returns. This also means you can lose money as well.

Investing is a balance of risk and return. Higher returns are rewarded by higher risk. There is no free lunch unless you have competitive advantage over the market, which you probably do not.


If you are long term (5+ years out) in your investment, stable income and not retiring soon, you can accept more risk as the market can be volatile in the short term. Otherwise there are safe investments, bonds or GICs. But even these are subject to interest rate risk.

Other common investments you can consider are saving account, real estate, income trusts, hedge funds, mutual funds, ETFs, commodities, precious metals, and preferred stock. There is no reason to stick with one instrument, you can diversify across the different asset classes based on your risk tolerance.

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