Kinds of Investments

There are many kinds of investments available in our market nowadays, especially with the assistance of Internet Technology for investments, all investors can make investment with couple of clicks through their computers.

Basically, investments can be broadly classified into the following groups,

  • Very secure fixed Income investments , are those that are very safe and yield a fixed dividend or return every year. As the return is often lower than the rate of inflation, the real value of the investment actually falls. A prime examples is a deposit with a bank. These deposits are extremely safe.
  • Secure fixed income investments, are those that pay a fixed return and are reasonably secure. They do bear the risk of economic downturns. Schemes floated by mutual funds are in this category. Several schemes guarantee a fixed return. However, the possibility exists of their not being able to provide this return in a depressed market. Some new products like capital protected mutual fund is also available in market . This kind of capital protected are also categorized under secure fixed income investments.
  • Fixed income investments are those that give reasonable returns but are not necessarily very safe( although they can be). Debentures and corporate fixed deposits are considered fixed income investments.Those corporate raise capital through debentures or bonds and promise to pay the debtors certain amount of interest of per annum. In the case that the corporate is not doing well, the corporate might not able to pay the interest and the debtors might not able to get back their money.
  • Equity shares are the ordinary shares of companies. Investments in equity shares can be risky in that, should the company make losses or go through a economic recession, the value of the shares could plunge. Alternatively, if the company is going through a good time, the shares could soar too.

Besides, Equity shares can be subdivided into two type of shares.

 

  • Income Shares - These shared do not appreciate in value much but the dividends paid on them are high. Consequently, there is usually a limit on how much these shares will grow. Company with high dividend policy are considered as income shares. Besides, a new investment product, real estate investment trust ( REIT ), which focus on real estate investment and share the rental income with the investors, is considered as income shares as well. Income shares is good in providing cash flow, but bad in capital gain or capital appreciation.
  • Growth Shares - The earning of growth shares is higher than those in the same industry. Consequently, their appreciation is higher. The returns will be low as the company would be reinvesting the bulk of their profits in the company in order for it to grow. Growth shares is good in capital gain, but it is not good in providing cash flow as it seldom distribute dividends.

Investments Kinds

The higher risk the investment typess or investment kinds, the higher the return.