Understanding the 3 Types of Investment Opportunities

Investments refer to spending money with the anticipation or expectation of future returns in terms of profit and money. When you invest in something, you acquire the risk of probable loss along with the possible expectation of a higher return on investment. It’s a Janus-faced reality weaved by the market of investors. For financial advice, you should consult investment advisors in North Sydney, however for financial knowledge, you can explore online. The key financial knowledge has to be the three main types of investment which are referred to as lending investments, ownership investment and cash equivalents.

1. Lending investment

The lending investment often has lower risks and low return on investment. These can include savings accounts and bonds. Saving accounts are bank accounts where you can invest money that will essentially be used by banks as small loans to be distributed to other people. You will be paid interest on your savings and will face low risks.  Bonds are a form of defensive investment that can be sold quickly that can carry similar levels of low risk and return on investment.

2. Ownership investment

Ownership investments are much more profitable and as a result, are riskier than lending investments or cash equivalents.  These kinds of investments can include stocks investment, business investment, real estate investment and investments invaluable arts and artefacts. As investment advisors at various Australian institutions will tell you, these are the optimal forms of investment.

Stocks are a form of growth investment. Stocks constitute of a certificate for the portion of a company’s value. These are assets for which you will receive a return on investment. Through their ownership, you can have the authority of a shareholder. Stocks can rise or fall in value and can make you incur losses so it is important to invest intelligently. Your returns are determined by the value a stock market ascertains or allots to the asset you own. Your income can come from dividends, as well.

Businesses can be ownership investments where entrepreneurs own the business they have injected capital into and as a consequence face the risks of business loss and enjoy profits in the face of success. Real estate property investment is also a growth investment strategy because property can increase in value and reap higher returns to the investor. You can buy, rent or re-sell properties to get value out of them. Properties carry risk too; they can fall in value. Valuable art is also considered an investment and will increase in value over time. Art pieces by Picasso, Edward Hopper or Velasquez may require significant upkeep, but they have become more valuable and rare overtime.

3.Cash equivalents

The final kind of investment is cash equivalents. These are far more liquid than the other two and carry low risks as well as low returns. Examples of cash equivalent investments are money market funds. These funds can be converted back into cash as a liquid investment strategy. Money market accounts can allow for transactions through checks. They can yield a 2% return at most. Cash equivalents are not to be confused with cash investments like bank accounts, high-interest savings and term deposits.