Investment assets are items procured to produce future income or a future increase in value. These assets can either be tangible or intangible. Tangible assets are physical items such as equipment and property, while intangible assets are not physical items but things like patents, copyrights, trademarks, and other intellectual property. What types of investment assets can you buy and sell?
Fiat Currency
Fiat currency is any currency not supported by a physical commodity, such as gold, but by the government that issued it. The most common example is cash. Fiat currency rarely appreciates in value but depreciates through inflation. However, it can increase in value relative to fiat currencies issued by different countries in movements on the exchange rate.
The benefit to fiat currency as an investment asset is it’s liquid, and you can use it to capitalize on other investment types. You can also invest in savings accounts, certificates of deposit (CDs), and money market accounts.
Debt Investments
Debt investments take many forms and are usually used for regular income than capital gains. The riskier the investment, the higher the potential return. For example, peer-to-peer lending, where you loan your money directly to another individual, is one type of debt investment. Government bonds, as loans to the government, are also debt investments. Examples of bonds as debt investments include:
- U.S. Treasury bonds are issued by the federal government and offer various terms of maturity.
- Municipal bonds are issued by local governments to finance expenditures and vary in repayment terms.
- Corporate bonds are issued by companies to quickly access funds the organization will use for various purposes. These usually have higher rates of return than government bonds due to their increased risk.
Equity Shares
Equity shares are commonly known as stocks, with which you purchase shares, or partial ownership, in a company. Usually, investors purchase equity shares through publicly traded stocks on a stock exchange, although you can buy shares in a privately owned company as well. In the latter scenario, however, it can be more challenging to sell the shares when you’re ready to move on. Publicly traded company shares tend to be safer bets, as they must follow many rules and regulations that private companies might not.
You can profit from owning shares in a company through two main avenues. The first is dividends, which are portions of the profits the company has made. The other is capital gains, through which the value of your shares goes up over time. Like any other item bought and sold, share prices rely on supply and demand. When people are excited about a company’s profitability and buy lots of shares, the price goes up, while the converse is also true.
The many types of stocks you can buy include:
- Income stocks. These stocks pay regular dividends and typically provide high-yield income dispersed quarterly. They comprise organizations like big-name utility companies.
- Growth stocks. This type refers to stocks of companies growing more rapidly than the market average, such as a well-performing tech startup. Growth stocks rarely pay dividends but have great potential for capital gain.
- Value stocks. These stocks belong to companies with lower price-to-earnings (PE) ratios than others and, thus, often come cheaper. The idea behind purchasing value stocks is the price will rebound and the PE ratio will improve.
- Blue-chip stocks. Large, secure corporations with a very solid history and good outlook offer this type of stock. They usually pay out dividends and include stocks of companies such as Walmart, Microsoft, and Visa.
- Penny stocks. As the name suggests, these stocks are very inexpensive shares of public companies that are usually valued under $1. Penny stocks are typically volatile.
Real Estate
You can make money in real estate in a few ways. First, you can purchase residential or commercial properties and rent them out. Renting gives you income and adds capital gains if the value of the property increases while you pay down the mortgage using rental proceeds.
You could also purchase and refurbish a property and then sell it immediately, commonly known as flipping a house. Because the amount of cash or financing required to invest in real estate is relatively high, you can also invest in real estate funds or a real estate investment trust (REIT). REITs allow you to invest in part in large, income-generating properties such as malls, resorts, hotels, and storage facilities. Your share grants you a portion of the income produced by the real estate, which is typically traded publicly.
You could also invest in timber-producing property or farmland. Investors can purchase, outright or in part, managed forests that are logged for timber, tree farms, and similar goods. Home ownership is an investment in real estate, so consider that before adding more investment property to your portfolio.
Commodities
Commodities refer to physical items such as silver, gold, wheat, iron, oil, and timber. There’s no dividend to be made from holding commodities. In fact, some types of commodities will cost you money to own. The sole purpose of trading in commodities is to generate capital gains. Simply put, you hope to buy low and sell high. Physical commodities prices are unpredictable and fluctuate considerably, making this a high-risk but high-reward investment.
Hedge Funds
A hedge fund is a pool of various relatively liquid investments ranging from stocks to commodities, bonds, and other hedge funds. They use very complex, often high-risk trading techniques such as leverage, short selling, and derivatives. These investments are called hedge funds because the principal is you’re hedging your losses with the successful investments’ gains. Essentially, you’re trying a variety of high-risk investment strategies with the hope you’ll hit more than you miss.
If you’d like to learn more about investment strategies and opportunities, reach out to our knowledgeable team at Titan Funding. You can contact us online or call us at 855-912-8313. A member of our team would be happy to discuss your investment options and help you find the best investment for your situation and needs.