Investments: What Opportunities Are There? [Comprehensive List]
Investments: What Opportunities Are There?
When it comes to investing, you have probably heard of some options such as stocks, bonds, IRAs, and a 401(k). But did you know that those are actually just a small amount of the investment opportunities that exist? If you’ve ever wondered what “IRA” stands for or what other investment opportunities are available, this list is for you!
(This list is not here to tell you what to do, but to guide you in understanding what’s available! Reach out to talk through what would be best for you!)
Stocks: Stocks represent ownership of a portion of a corporation. These can also be known as equity shares. You make money on stocks when a company is successful and their worth increases. Stocks have various levels of “risk,” and there are investment strategies here that can accommodate your comfortability with risk. As you may assume, higher risk means larger swings while lower risk typically is a little more predictable.
Bonds: A bond is a loan that an investor makes typically to a federal agency, government, corporation, or another organization. You make money on this kind of an investment off of the interest that the borrower agrees to pay back in addition to the original amount. The downside is that you will have to wait until the bond’s term is up in order to see any returns on this investment.
Mutual Funds: This kind of investing pools your money with other investors with common investment goals. Unlike bonds, mutual funds purchase a portfolio of other investments, such as bonds, stocks, money-market instruments, etc… In the case of mutual funds, instead of owning an individual bond, you own a portion of the fund that owns the bond. With each share of the mutual fund you own, the larger your slice of the investment pie you have.
ETF’s (Exchange-Traded Funds): Much like a mutual fund, exchange-traded funds (ETF) combine your investments with a pool of other investors; however, ETF shares can be traded like stocks. Because of this, the price of ETF shares can fluctuate based on the time of day, whereas mutual funds have just one price that is calculated at the end of the day.
Annuities: An annuity is an agreement between you and an insurance company. You pay an initial lump sum of money or payments over a set period of time to the insurance company. In return, the insurance company provides a guaranteed income starting at your retirement for the rest of your life paid out monthly.
Real Estate: Owning a rental property can be a great investment. You’ll have to take on expenses like the mortgage, property taxes, insurance, and maintenance but if you don’t mind handling those details, it can be a good option. You can make money on real estate by charging enough rent to cover your expenses and anything leftover is your profit. You’ll want to be sure you can pay off your mortgage, but once that is fully paid off, your return increases! You can also make money investing in real estate by flipping houses, which involves purchasing property either when the market is low and selling when it is high, or by repairing and updating a property so it is worth more than what you bought it for and spent to improve it.
REITs (Real Estate Investment Trust): If investing in real estate by becoming a landlord or flipping houses seems a bit daunting to you, a Real Estate Investment Trust (REIT) may be the right option for you. REITs are bought and sold much like stocks and use investors’ money to buy, operate, and sell properties to produce income.
Currency: You can invest in currency on the foreign exchange market (forex). This is done by speculating how currencies will change in relation to another. Essentially you are betting that one will go up and another will go down in value. If you are right, then you make money. But if you are wrong, you’ll lose it.
Cash: A cash investment is a short-term investment that usually yields a low rate of return, but is considered a low-risk investment. For instance, a savings account could be considered a cash investment. The bank provides a return for storing your cash at the bank. In return, the bank may use that cash to provide loans to other clients and make a return on that money. A money market is another form of cash investment that usually matures in six months or less.
Collectibles: A collectible is any item that can be sold for more than their original sale price. These can be baseball cards, certain metals, or even mass-produced items. You’ll likely need a significant amount of storage space to hold the items while their worth increases. If you aren’t a full-time collector, you are more likely to cash in on heirlooms you’ve hung on to or other items that you inherit and then sell at a later time.
Life Insurance: Whole life insurance is a more expensive policy by comparison to a term life insurance policy, but it also has a guaranteed minimum rate of return on the cash value of your policy. Part of your premium payment gets accumulated in a cash value account which grows over time.
CD’s (Certificate of Deposit): A certificate of deposit (CD) is usually issued by a bank. You lock in your funds for a period of time and the bank offers you a high return rate. This kind of investment has a lower return rate than stocks or bonds; however, it is considered to be a much safer investment. You can’t touch your money for the set period of time, but your returns are usually paid out monthly or semi-annually.
401(k) Plan: This is a retirement savings plan offered by many employers. The employee has a percentage of their paycheck go directly into an investment account. In some cases, the employer will match the employee’s contribution. This matching contribution is what usually makes this such an attractive investment option. The contributions will usually go into a traditional IRA or a Roth IRA.
403(b) Plan: A 403(b) plan is like a 401(k) plan. However it is specific to employees of public schools and tax-exempt organizations. Aside from who can benefit from a 403(b) plan, one of the key differences from a 401(k) is that it offers a special plan for anyone with 15 or more years with the same employer and they vest over shorter periods of time.
457 Plan: The 457 plan is also similar to the 401(k) plan as both are tax-advantaged employee retirement savings plans. However, 457 plans are offered by state and local governments as well as some nonprofits. If you qualify for the 457 plan one of the greatest benefits is that there is no penalty if you withdraw funds before age 59 1⁄2.
IRA: An Individual Retirement Account (IRA) helps you save for retirement by offering tax advantages. A traditional IRA allows you to make contributions so your money can grow tax- deferred. However, you must start taking money out after you turn 72 years old. And there is no limit to how much you can contribute for a traditional IRA.
Roth IRA: This kind of IRA was named after William Roth, a former Delaware Senator. The key differences between a Roth IRA and a Traditional IRA are that a Roth IRA is pre-taxed, you can start withdrawing from your Roth IRA after 59 1⁄2 years old, and you can continue to contribute to your Roth IRA so long as you have qualifying earned income.
SEP IRA (Simplified Employee Pension Plan): This is an employer contribution kind of investment. It is especially beneficial for self-employed or small business owners. SEP IRA allows an employer to contribute to an IRA for themselves and their employees. A big benefit is that the amount contributed can fluctuate which makes it perfect for small businesses and self- employed individuals.
529 Savings Plan: The 529 plan was named after Section 529 in the Internal Revenue Code which authorizes qualified tuition programs to be tax free. The 529 Savings Plans allows you to contribute funds after taxes into mutual funds, ETFs, and similar investments for the purpose of paying for qualified higher education expenses.
ESA (Education Savings Account): An Education Savings Account (ESA), allows you to set aside funds for your child’s elementary, secondary, and higher education expenses. These contributions are tax-deferred and federal tax-free. Contributions must be made while your child is under 18 years old and it must be used by the time they turn 30 years old.
Cryptocurrency: Bitcoin is probably the first cryptocurrency that comes to mind, but there are others like Dogecoin, Litecoin, XRP, and Ethereum to name a few. Cryptocurrency is essentially digital money that is used as investments and for online purchases. You can purchase cryptocurrency with cash and hold your cryptocurrency as its value fluctuates. The hope is that you purchase it at a lower value and then it raises in value when you spend it so you have more than what you purchased originally. The risk is that cryptocurrency’s value is based solely on what people are willing to pay or exchange for it. So cryptocurrency changes in value constantly.
Did you know? A lot of investment opportunities provide account options for investing individually, jointly, or as a minor. No matter where you’re at in life, you can get started!
Quite the list, right!? Hopefully this was insightful and you learned a little something about a few of these options!
If you’ve ever wondered which investments will help you reach your financial goals or if you are unsure your current investments are doing that, we’d love for you to schedule a complimentary meeting, attend one of our local events, or give 210 Financial a call at 309.263.1333!
All investments are subject to risk including potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Guarantees and protections provided by insurance products, including annuities, are back by the financial strength and claims-paying ability of the issuing insurance carrier.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. Neither AEWM nor advisors providing investment advisory serves through AEWM recommend or facilitate the buying or selling of cryptocurrencies. Insurance products are offered through the insurance business 210 Financial. 210 Financial is also an Investment Advisory practice that offers products and services through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by 210 Financial are not subject to Investment Advisor requirements. 2076975-11/23
Content prepared by Austin Savage & Co.
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