Now that you have an idea of some of the places where you can invest your hard-earned dollar, we hope that you are on your way to making your money work for you. Here's a recap of the 20 investments detailed in this tutorial:
- An American Depository Receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on U.S. stock markets just like regular stocks and are issued/sponsored in the U.S. by a bank or brokerage.
- An annuity is a series of fixed-amount payments paid at regular intervals over the specified period of the annuity. Most annuities are purchased through an insurance company.
- A closed-end fund is an investment fund that issues a fixed number of shares in an actively managed portfolio of securities. The shares are traded in the market just like stocks, but because closed-end funds represent a portfolio of securities they are very similar to a mutual fund.
- A collectible is any physical asset that appreciates in value over time because it is rare or it is desired by many. Many people think of collectibles as things like stamps, coins, fine art or sports cards, but there really are no strict rules as to what is or is not a collectible.
- Common stock is ownership in part of a company. This gives you entitlement to a portion of the company's profits and any voting rights attached to the stock.
- A convertible bond is a bond that can be converted into the company's common stock. You can exercise the convertible bond and exchange the bond into a predetermined amount of shares in the company.
- When you buy a corporate bond, you are loaning your money to a corporation for a predetermined period of time (known as the maturity). In most cases, the bond's par value is $1,000. This is the face value of the bond and the amount the lender will be repaid once the bond matures.
- Futures are contracts on commodities, currencies, and stock market indexes that attempt to predict the value of these securities at some date in the future.
- Life insurance is income protection in the event of your death. The person you name as your beneficiary will receive proceeds from an insurance company to offset the income lost as a result of your death.
- Money market instruments are forms of debt that mature in less than one year and are very liquid.
- A mortgage-backed security (MBS), also known as a "mortgage pass-through" or a "pass-through certificate", is an investment instrument that represents ownership of an undivided interest in a group of mortgages. Principal and interest from the individual mortgages are used to pay principal and interest on the MBS.
- Municipal bonds, or "munis" for short, are debt securities issued by a state, municipality or county to finance its capital expenditures.
- A mutual fund is a large group of people who lump their money together and give it to a management company to invest it on their behalf. A mutual fund manager proceeds to buy a number of stocks from various markets and industries.
- Options are a privilege sold by one party to another that offers the buyer the right to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.
Preferred stock represents ownership in a company, but it usually does not give the holder voting rights (this may vary depending on the company).
- Real estate investing doesn't just mean purchasing a house - it can include vacation homes, commercial properties, land (both developed and undeveloped), condominiums and many other possibilities.
- Real Estate Investment Trusts (REITs) sell like stocks on the major exchanges and invest in real estate directly through properties or mortgages.
- Treasuries are a debt obligation of a national government. Because they are backed by the credit and taxing power of a country, they are regarded as having little or no risk of default.
- A unit investment trust (UIT) is a registered trust in which a fixed portfolio of income-producing securities is purchased and held to maturity.
- A zero-coupon security, or "stripped bond", is basically a regular coupon-paying bond without the coupons. The process of "stripping" or "zeroing" a bond is usually done by a brokerage or a bank.
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InvestingBond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.