Types of investments

TYPES OF INVESTMENTS 

There are a variety of investment vehicles that you can use to help you reach your financial goals. This section will give a brief overview of some of those vehicles and we will be going deeper into each one with our videos, interviews, and articles. There are many things to consider when deciding on which investment vehicle(s) you want to use so you have to have a clear vision for your financial goals and know your risk tolerance.

Diversification can be a layer of protection against losses and is a common practice for those who want to limit portfolio risk. Virtually all investments carry some level of risk and so it is important to educate yourself as much as possible and do not invest in things you are not familiar with. Using a trusted advisor is also highly recommended if you do not have the time to do the research necessary. We will include so books that we highly recommend that you read because there are so many tried and true strategies and successful blueprints to do well.

 

Real Estate

Whether you are buying real estate as your primary residence or you are buying real estate as an investment to rent or flip it has been proven to be one of the best investments you can make.

 

Home Ownership

Homeownership is one of the best long-term investments you can make because in most cases you are buying an appreciating asset so while you are paying off down the principle the value of the property is increasing. According to the National Association of Realtors, homeowners have a net worth 41 times higher than renters.

Becoming a homeowner should be a top priority and you should be working towards it as quickly as possible. Why? Because home values are increasing significantly so the house that you can afford today may be out of the budget next year. You likely can’t out-save the rate at which home values are increasing so the best thing you can do is jump in as soon as possible. Most people think that you have to put a lot of money down or that you have to have great credit to buy a house and neither is true! You should see a loan officer to discuss your options and see where you stand. We work with the best all of the US if you need a referral email [email protected] or complete the form below.

  • How much do you need for a down payment
  • How much house can you afford
  • What credit scores are required to buy a house

 

Real Estate Investing

Investing in real estate can provide cash flow, the properties appreciate, allows you to maximize your capital through leverage, and has many tax advantages. Also, as the principal is paid down and your property value increasing you can do a cash-out refinance and use that money to buy more properties.

  • Rental Properties
  • Fix and Flips
  • REITS
  • Residential Real Estate
  • Commercial Real Estate
  • Raw Land

 

IRAs

An individual retirement account allows you to save money for retirement in a tax-advantaged way.

3 types of IRAs

Traditional

Contributions to Traditional IRAs are often tax-deductible and the earnings can grow tax-deferred until you withdraw them when you retire.

Roth

Contributions are not tax-deductible but withdrawals are tax-free and there are no taxes on investment gains.

Roll Over 

These accounts are used to move money from old 401(K)s or other employer retirement plans into a new IRA. The money then will keep its tax-deferred status and doesn’t trigger early withdrawal penalties.

 

401(K)

A 401(K) is a tax-advantaged retirement account offered by many employers to their employees. Employees can make contributions to their accounts through payroll withholding and their employers will match some or all of the contributions. In this plan, you are not taxed until you withdraw that money, typically once you retire. Early withdrawal will likely have penalties.

 

Mutual Funds

Mutual fund companies pool money together from investors and invest that money. Investors pay a fee for this service as they are having someone else manage their investments for them.

Pros – Diversification, Expert Management, Liquidity, Convenience, Reinvestment of income, Range of investment options, and Affordability.

Cons – No Control over the portfolio, Capital Gains, Fees and Expenses, and Over-diversification.

 

Index Funds

Index funds are a type of mutual fund whose holdings track a particular market index typically made up of stocks or bonds. Index funds have managers who make sure that the fund performs the same as the index does.

Pros – Diversification, Lower taxes, and Lower cost

Cons – Lack of flexibility, can be volatile, can be vague, Limited upside, and fees.

 

Stocks

When you buy stocks you are buying ownership shares in a publicly-traded company. Companies sell stock to raise money then they use that money for various things: fund new projects, purchase inventory, invest in growth, pay off debt, or expand operations.

The value of stocks changes based on the value of the company and you can buy and sell stocks so if you buy a stock at a low price and then sell the stock when the price increases you make a profit. Some companies also make dividends to their shareholders which means they divide profit and pay it to investors.

 

Bonds

A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually include the terms for variable or fixed interest payments made by the borrower.

 

Annuities

An annuity is a financial product that pays out a fixed stream of payments to an individual, and these financial products are primarily used as an income stream for retirees. Annuities are contracts issued and distributed (or sold) by financial institutions, which invest funds from individuals. They help individuals address the risk of outliving their savings. Upon annuitization, the holding institution will issue a stream of payments at a later point in time.

 

Commodities

Commodities are an important aspect of most American’s daily life. A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas.

ETFs

An exchange-traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges, and ETF shares trade throughout the day just like an ordinary stock.

Certificates of Deposit

A certificate of deposit (CD) is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. Almost all consumer financial institutions offer them, although it’s up to each bank which CD terms it wants to offer, how much higher the rate will be compared to the bank’s savings and money market products, and what penalties it applies for early withdrawal.

Cryptocurrencies

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.