What is an 'Investment Product'

An investment product is a product offered to investors based on an underlying security or group of securities that is purchased with the expectation of earning a favorable return. Investment products are based on a wide range of underlying securities and encompass a broad range of investment objectives.

BREAKING DOWN 'Investment Product'

Investment products are available for individual and institutional investors. Investors utilize investment products to meet various investment goals and objectives. A wide range of investment products exist within the investment universe to help investors meet short-term and long-term investment goals. Overall, investors purchase investment products for their capital appreciation potential and income paying distributions.

Capital appreciation and income distribution are two standard classifications for investment products. Some investment products are purchased by an investor primarily for their potential to increase or appreciate in value over time given specified growth factors. Other investment products may have an additional income paying component. Fixed income investments such as bonds and commingled bond funds offer investors the opportunity to purchase an asset that may increase in value while also paying out fixed interest payments or capital distributions. Other income paying investment products include dividend-paying equities, real estate investment trusts and master limited partnerships. Modern portfolio theory suggests that an investor have a diversified portfolio of investments including a variety of investment products to obtain an optimal risk-return reward for their investments.

Investment Product Offerings

Below are some examples of investment products offered in the investment universe.

Stocks and stock funds – Stock investments represent equity ownership in a publicly traded company. Companies issue stock as part of a capital raising regime which funds the operations of the company. Stock investments have varying growth prospects and are typically analyzed based on characteristics such as estimated future earnings and price-to-earnings ratios. Stocks can be classified in various categories. Stocks may also offer dividends adding an income payout component to the investment. Stocks funds are a common investment product that include a diversified portfolio of stocks managed by a portfolio manager with a specific objective.

Bonds and bond funds – Bonds are one of the most well known fixed income products. They can be offered by governments or corporations. They are also issued as part of a company’s capital raising regime. Bonds pay investors interest in the form of coupon payments and offer full principal repayment at maturity. Investors can also invest in bond funds which include a portfolio of bonds managed by a portfolio manager for various objectives. Bonds and bond funds are typically classified by a credit rating which offers insight on their capital structure and ability to make timely payments.

Derivatives – Derivatives are investment products that are offered based on the movement of a specified underlying asset. Put or call options on stocks and futures based on the movement of commodities prices are a few of the market’s leading derivative investment products.

Within the investment market, investment products can be structured in various ways. Thus, investors have a wide variety of options in addition to buying an investment product focused on the movement of a single security. Structured investment products can include mutual funds, exchange traded funds, money market funds, annuities and more. In the U.S. and globally, investment products are highly regulated requiring substantial documentation to provide investors with a detailed understanding of investment products for which they may choose to invest.

RELATED TERMS
  1. Fund Category

    A fund category is a way of differentiating mutual funds according ...
  2. Structured Funds

    Structured funds are a type of fund that combines both equity ...
  3. Income Investment Company

    A money management firm whose primary investment goal is to generate ...
  4. Capital Growth

    Capital growth is the appreciation of the value of an asset over ...
  5. Corporate Bond

    A corporate bond is a debt security issued by a corporation and ...
  6. Investment

    An investment is an asset or item that is purchased with the ...
Related Articles
  1. Investing

    Bond Funds Boost Income, Reduce Risk

    Bond funds can provide stable returns for those who depend on their investment income.
  2. Investing

    The Top 5 International Bond Funds for 2016

    Understand the opportunities available within the international bond market, and learn about the top-rated global bond funds for 2016.
  3. Investing

    Meet Your Investment Objectives With Income Funds

    Discover the categories of income funds and the types of investors for whom they are appropriate.
  4. Investing

    The Top 5 Short-Term Bond Funds for 2016

    Learn how short-duration bonds can add value to an asset allocation strategy, and discover the top five short-term bond funds for 2016.
  5. Financial Advisor

    A Fresh Look At The Financial Markets

    Different markets provide unique opportunities and risks for investors. Find out more here.
  6. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  7. Investing

    How Bonds Are Vital to a Successful Portfolio

    While bonds are a vital part of an investment portfolio, they are often ignored.
  8. Investing

    Cash Vs. Bonds: What to Pick in Times of Uncertainty

    Learn about the benefits and drawbacks of holding cash versus investing in bonds to ensure you make the right decision about how to best safeguard your money.
  9. Investing

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
RELATED FAQS
  1. What are the main advantages of fixed income securities?

    Learn why the addition of fixed income securities are common among investors who are attempting to limit their exposure to ... Read Answer >>
  2. Can Mutual Funds Only Hold Bonds?

    Find out which mutual funds include only bonds in their portfolios. Learn why some funds invest in different types of bonds ... Read Answer >>
  3. What are some safe fixed-income investments?

    Learn what types of fixed income securities provide investors with safe options for protecting principal and providing steady ... Read Answer >>
Hot Definitions
  1. Treasury Yield

    Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations.
  2. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  3. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  4. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  5. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  6. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
Trading Center