Major Types of Investment Vehicles

Presented by Marc Aarons

I know that investing can feel overwhelming. After all, each type of investment vehicle offers a unique balance of risk, reward, and flexibility, and each investor requires a different mix of each type.

With that said, one of the best ways to feel empowered in your financial life is through education. It’s in that spirit that I thought I would share an overview of the main types of investment vehicles.

 

Stocks

 

• What they are: Stocks represent partial ownership in a company. When you buy a stock, you’re buying a share of that company and potentially a portion of its profits.
• Advantages: Potential for strong long-term growth, the ability to earn dividends, and high liquidity since they can be bought and sold on public exchanges.
• Disadvantages: Prone to market volatility, losses can be significant, and individual stock selection requires research and risk tolerance.

 

Bonds

 

• What they are: Bonds are debt instruments you purchase, essentially lending money to a corporation or government. In exchange, the issuer agrees to return your original investment (the principal) along with interest that has accrued once the bond matures.
• Advantages: Generally less risky than stocks, provide regular income, and may help stabilize an investment portfolio.
• Disadvantages: Lower potential returns, risk of default from the issuer, and bond prices can be affected by interest rate changes.

 

Mutual Funds

 

• What they are: Mutual funds pool money from multiple investors to invest in a diversified mix of stocks, bonds, or other securities, managed by professionals.
• Advantages: Instant diversification, professionally managed, and easy access with relatively low initial investments.
• Disadvantages: Management fees and expense ratios can eat into returns, limited control over individual holdings, and potential tax inefficiencies.

 

Exchange-Traded Funds 

 

• What they are: ETFs are similar to mutual funds but trade on stock exchanges like individual stocks, offering access to a wide variety of markets or sectors.
• Advantages: Low fees, tax efficiency, and the flexibility to trade throughout the day.
• Disadvantages: Intraday price volatility, potential brokerage fees, and certain ETFs may lack diversification.

 

Certificates of Deposit (CDs)

 

• What they are: CDs are time deposits you open through a bank by agreeing to leave your money untouched for a fixed term. In return, the bank pays you a guaranteed interest rate and returns your full deposit along with that interest when the term ends.
• Advantages: Very low risk, predictable returns, and often Federal Deposit Insurance Corporation insured.
• Disadvantages: Limited liquidity due to early withdrawal penalties, lower returns compared to stocks and other market-based investments, and funds are locked in for a fixed term.

 

Real Estate and Collectibles

 

• What they are: These are tangible assets such as rental properties, precious metals, or artwork, bought with the intent to generate income or appreciate in value.
• Advantages: Can offer passive income, potential for value growth, and a hedge against inflation.
• Disadvantages: Illiquidity, high entry and maintenance costs, and potential difficulty in accurately valuing or selling assets.

 

Target-Date Funds

 

• What they are: These funds automatically adjust their asset allocation over time based on a planned retirement date, shifting from growth to preservation.
• Advantages: Convenient, hands-off investing with built-in diversification and a shifting strategy to reduce risk over time.
• Disadvantages: May not match individual goals or risk tolerance, can have varying fee structures, and investors still need to monitor for suitability.

 

I hope this was a helpful overview for you. As always, if you have questions or would like help reviewing your investment strategy, feel free to reach out. We’re always here to support your financial journey.

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

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Investment advisory and financial planning services are provided by Money Managers, Inc. a registered investment advisor.  Our CRD Number is 151602.  To access our most recent version of our Form ADV, Form ADV Part 2A and privacy policy, visit https://adviserinfo.sec.gov/. This information is for educational purposes only.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.