To understand the investment concept, it is essential to know first what an investment is. Investment refers to a specific process wherein an entity makes an investment and the entity or the investor expects to gain something out of the investment. In order to fully understand this notion, one must know first the basic functions of investment.
To better understand the different types of investment, it would be helpful to look into the different functions of the different types of investments. The most common type of investment is usually known as the stock market where the main activity is for investors to buy and sell the stocks that they have. Stock investments can either be domestic or foreign based. Some investors invest in companies that make goods and services which they can sell locally while others prefer to invest on shares of international companies.
Another type of investment is the bond market. With the help of bonds, investors are able to purchase units of equity that will mature in a specified period of time at a certain price. The bond market allows the investors to create security by borrowing money that will mature in a fixed amount of time and pay back that amount at a specified date in the future – these bonds are usually secured by various types of fixed income assets such as government securities, corporate securities, insurance and equity securities. In order for investors to create more security, there are also investment banks that offer these securities in different packages so investors can choose which among these would best suit their portfolio.
Another common type of investment is the bond market where bonds, stocks and other securities are sold or traded. These are sold or traded in specific markets, usually local markets, to raise money or to finance a particular project or idea. Bonds are used as guarantees to secure loans from investors. Stocks on the other hand are sold in stock exchanges where buyers and sellers come together and place their orders for buying and selling stocks.
There are other investment types aside from these. For instance, real estate investments include mortgages, interests from bank financing projects, land and development and equities from publicly traded companies. Private placements refer to sale of securities through private placement offerings.
There are also other types of investments aside from these. Some people prefer to have the lump sum value of their assets invested in money market funds. Money market funds are one of the most preferred options especially for long-term investments as they allow the investors to be assured of their money’s return at the most favorable time regardless of economic trends. Another kind of common investment is the buy-sell agreement wherein an investor and a seller to enter into a contract promising that a certain percentage of the total money market fund will be transferred to the buyer if the seller is not capable of paying off his loan. The buy-sell agreement is used in cases wherein there is a doubt regarding the capability of a particular investor to pay off his loan or when he has already defaulted in payment of his loan.