Variety Really is Key to Retirement Success: 8 Different Types of Investments

What are your goals, dreams, and aspirations? Are you concerned about your financial future? Do you need to put your kids through college? Do you want to retire while you can still do more than rock in a chair? Do you want to ensure your children the financial advantages that you lacked while growing up? Do you want to live a reasonably comfortable retirement without a lot of financial worries? If you are reading this article, I can only assume that your answer is yes, yes, and yes!

Although many people realizing the importance of saving and investing for their future, many folks really have no idea how to go about investing their hard-earned money, or even the different types of investments that are available. If your idea of investing involves a piggy-shaped ceramic jar or the underside of a mattress, fear not. Below you will find information about the different types of investments available right at your fingertips.

1. Savings Accounts and Money Markets: Savings accounts and money markets offer very little return; in fact, although they are technically not a form of investment, they do play an important role in managing your liquid cash assets. They are certainly a great way to get started or teach your kids the process of saving.

2. Certificates of Deposit: Certificates of Deposit, or CDs, are similar to savings accounts, except they pay better interest and provide limited liquidity. The reason for the higher interest rate is simple: when you open a CD at your local financial institution, you agree to leave the money there for a set amount of time; generally, the shortest amount of time is six months, but you may agree to a term of one year, two years, or even five years. Typically the longer you agree to keep the CD, the higher the interest rate. CDs can be redeemed prior to agreed upon term but you will be assessed an early withdrawal or termination fee. One way you can minimize these fees is to ladder your CDs with various maturities to achieve higher yields and increase liquidity.

3. Bonds: When you invest in bonds, you are actually lending money, usually to a municipality, government agency, or a public company. Bonds are believed to be more risky than CDs but less risky than stocks. They are often used to provide income rather than growth.

4. Stocks: When you buy stock, you buy a piece of the company and any rights that go along with partial ownership. The way to make a profit with stocks is to buy low and sell high or to receive stock dividends. Stocks can be quite risky and are usually bought with a long term horizon with an objective of growth.

5. Mutual Funds: When you invest in mutual funds, you are joining a group of others who are also investing in the mutual fund. Basically, you and the others share the cost of hiring a professional to manage your assets, and most mutual funds include a variety of different investments, such as high-risk, long-term, short-term, stocks, bonds, and the like. They believed to deliver the highest level of diversification and can be used to manage risk.

6. Real Estate: When you invest in real estate, you may be purchasing with the intent to re-sell at a profit, or you may be buying property to use as rental property. Traditionally considered a sound investment, the real estate market is currently a buyer’s market. The biggest advantage of real estate is the use of leverage. But remember that leverage is a powerful force that can work for you or against you. Also real estate is generally an illiquid asset. There are a lot of fees involved in buying and selling so you really have to know what you are doing. It can also become a liability if you cannot sell or rent the property quickly.

7. Foreign Currency: The Forex market is a currency-trading market that is open all the time and accessible via the Internet. With Forex, you trade currency pairs for other currency pairs in the hope that you will trade for currency that has more value.

8. Insurance: Some people choose to use life insurance as an investment. Insurance can be one of the best tools to help you plan for retirement income or transferring wealth to your heirs. An insurance agent or financial advisor can help you choose the right one.

Of course there are other different forms of investment, such as investing in a startup company or some other form of business. But as you can see a variety of types of investment can add spice and diversification to your financial future. The first question you should ask is “what are these funds for?” This will help you determine your risk tolerance and time horizon for the funds in question. Once your goal is defined, you can use the investment options above to find the best match.