Sunday, July 26, 2009

Different Types of Investments

Investments are anything in which people put money in the hope of gaining financial reward. There is an element of risk in all investments and the amount of financial reward which can be hoped for is usually inversely proportionate to the risk; that is, higher risk investments have the potential for yielding greater returns, yet also involve a greater risk of losing the investment completely. The classic example of a low yielding, low risk investment is government bonds. For the investor to lose out on the sum invested in government bonds, the government would have to go bankrupt and default on its debts. In the developed Western world, this is almost unheard of. Naturally, in poorer, less developed countries, this is not so, and the greater interest rate offered on their bonds reflects the greater risk involved.

Stocks and shared in limited companies are the quintessential form of investment in modern economies. Even other forms of investment, such as pensions or unit trusts, are often only indirect ways of investing in shares. For example, when a person makes contributions to a company providing a private pension, the company will, more often than not, invest that money in corporate shares. Property is the other major investment vehicle.

FD (Fixed Deposit) or CD (Certificate of Deposit) are one of the safest investment instruments compared to stocks because these investements are backed with insurance. The CD rates mostly depends upon the duration of your deposit. You can make deposit in bank for various fixed time frames eg. 6 month CD, 12 month CD, 24 month CD and the reward is payed accordingly.

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