A Guide To Different Investment Vehicles
Investing wisely is the key to a profitable portfolio. There are numerous investment vehicles available, and it can be overwhelming trying to differentiate between the options. Here are 5 different investment vehicles for the savvy investor.
The most common investment vehicle is direct investment in stocks. Whether you choose to invest in the London Stock Exchange or in the overseas exchanges like the NYSE or TSX, there are a wealth of companies in every imaginable sector. It is important not to invest all of your money in a single stock.
Although they tend to generate lower returns than stocks in the long term, bonds are a guaranteed investment, usually backed by the stability of the government issuing them. While there has been some turmoil in the European market recently, there is still security in these investment vehicles.
This is a fixed term deposit similar to bonds, but usually with a higher interest rate and is guaranteed by the banks, rather than a government or public entity. This type of investment vehicle requires a minimum deposit amount and a commitment to a fixed deposit timeline, in exchange for the guaranteed rate. A savvy investor with a good amount of capital can ladder these deposits to offer a continuous return on investment.
Investment trusts are a unique investment vehicle. They are a company that offers shares, however, the money they raise through selling their own shares, is then invested in purchasing shares in other companies. It is similar to having someone at your local bank do investments, however you are trusting your investment to the collective experience of a group of investors who are looking to make the maximum yield.
The last investment vehicle we will look at are individual savings accounts, known as ISA’s. These take two forms, either a cash ISA or a Share ISA. A share ISA invests the money from the account into shares on the stock market, while a cash ISA pays an interest rate on the money in the account. The difference between a regular savings account and an ISA is the tax benefit, there is no tax on the interest paid in an ISA, however if you withdraw from or close the ISA, the withdrawal amount is taxable.
In investing, knowledge is power, and knowing your investment options will go a long way in ensuring your investment success. Of course anyone who is contemplating moving into an arena such as financial investment, should be well aware that they could not get back as much as they put in.
This article was brought to you by Emanuel Arbib – read more on his blog.