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Value Investment and Mindset

What are the Types of Investment in Financial Market?

In the financial market, there are 5 Economic types of investment which we can invest in.

Stocks
Exchange Traded Funds (ETF)
Mutual Funds
Cryptocurrency
Commodity

Stocks:

It is the most popular investment in the financial market. Buying stock means -

You’re buying ownership stakes in publicly tracked companies like FB, Apple, Amazon, Google, Microsoft, etc.

Normally people buy stocks hoping that they will increase in price and sell in profit.

However, risks of investment in stocks are higher than ETF and MF

ETFs (Exchange Traded Funds):

It is a collection of stocks in a portfolio built for inventors to invest.

The common ETFs found in the market are SPY which tracks the S&P 500 index and QQQ which tracks the NASDAQ 100 index

It is often recommended for people with low-Risk tolerance because ETFs are more diversified than individual stock

The difference between stock and ETFs is that buying stock is buying an individual business while buying ETFs means buying a portfolio with numbers of stock in it.

Other than that there is not much difference between stock and ETFs

Mutual Funds:

Mutual funds are a pool of investors' money that is invested broadly in many companies.
It can either be actively managed or passively managed
It is pretty similar to ETFs where we can pick which fund we want to invest in but like ETFs mutual funds are bought through a fund company, while ETFs can be bought and sold on the stock market.
Risk in mutual funds is lower than buying stocks due to its diversification

Cryptocurrency:

Currencies like Bitcoin, and Ethereum are digital currencies that allow people to buy and sell in the financial market.
Very Risky investment as no government or business is backing up the value of cryptocurrencies
Volatility in cryptocurrencies is super valid and not everyone can handle it.

** We do not personally recommend anyone to invest in crypto because it is super risky.

Commodity:

Gold and crude oil are also some of the things you can invest in.

They are very common in future markets where professionals seek to hedge their financial stake in the commodities.
Normal investors should make sure they fully understand futures before investing in them.
Also it is risky as well because any sudden events or political action can greatly affect the price.

** Not recommended for beginners as well

Conclusion:

“Don’t invest in anything you don’t truly understand”

#investment #typesofinvestment #valueinvesting #finance #moneyinvest #bestinvestment

Last Updated: Oct 04, 2024

Tags: #investment #typesofinvestment #valueinvesting #finance #moneyinvest #investment #bestinvestment Category: Finance & Investment Learning Lifestyle