Types of Investments

The following are a few basic types of investments with easy to understand explanations. If you are looking for investments for beginners, this is a great place to start. Learning about investing basics as a whole is an important first step towards earning a lot of money with securities.


Stocks are equity investments. By purchasing stock in a corporation, you become part owner in the company, called a stockholder. You have the right to vote in the company because you are a stockholder. You can earn money two ways with stocks. Capital gains are earned when the value of the stock increases. If you buy stock A at $10 and then sell Stock A at $13, you make $3.

Many corporations also pay dividends to their stockholders. This is often done on a quarterly basis. For example, Company B might pay $.25 per share you own per quarter. If you own 100 shares, you will be paid $25 every 3 months for a total of $100 a year. Corporations are not required to pay dividends. Usually, stronger and more established companies pay dividends consistently and new companies wait for growth.


Unlike stocks, bonds are a debt investments. You do not own any part of a company if you buy bonds. You can buy corporate bonds or government bonds. When you purchase a bond, you are basically lending money to the entity you are purchasing from. You will be repaid that amount plus interest at the maturity date. For example, if you buy a bond for $1,000 and an interest rate of 4% is agreed to be paid each year with a maturity time of 5 years, you will earn $40 per year for a total of $200. After 5 years, you’ll be paid $1,200. The terms of the bond will vary.

Mutual Funds

Mutual funds are pooled investments. Many investors bring their money together to have a larger sum to invest in many different securities. This allows each investor to invested in a wide variety of investments. This is popular because it means the investors don’t have to research each investment and they get a well-diversified investment. Mutual fund securities can include stocks, bonds, commodities, or a combination of any kind of securities.

Savings Accounts

If you are very risk-averse and worry about losing your money, you can always keep cash in a savings account. This isn’t exactly an investment, but most will pay a small amount of interest. Of course, if you want to invest and earn money, I strongly suggest looking into any of the previous types of investments to earn more on your money.

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