There are many types of investment instruments traded in the financial and capital markets. These investment instruments include:
- Fixed deposits
- Savings accounts
- Bonds
- Stocks
- Commodities
- Unit trusts
- Derivatives
- Real estate
- Other collectible assets
Many retail investors only focus on risk and returns when choosing their investments. However, there are a number of factors that ought to be considered:
- Security of principal and income
- Time horizon
- Risk tolerance
- Rate of return or yield
- Liquidity
- Diversification
- Tax status
- Size of investment units or denominations
- Use as collateral for loans
- Protection against creditor’s claims
- Callability
For many investors, security of principal and income is of great importance. They want to be able to get their money back, or avoid losing money on their investments. This is natural and referred to as being risk averse.
However, when risk is examined more closely, other fundamental questions arise. For example, how long do you want to stay invested, how easy is it to liquidate your investment, what are the potential tax benefits, should I build a diversified portfolio, etc.
If you are unsure what type of investment is suitable for you, please consult your trusted FLA Organization Financial Planner for more information today.
