There are total of 12 types of products in financial investment which
1.Stocks are a type of security that gives stockholders a share of
ownership in a company. Stocks also are called “equities.”
2.A bond is a debt security, similar to an IOU. Borrowers issue bonds to
raise money from investors willing to lend them money for a certain amount of
time. When you buy a bond, you are lending to the issuer, which may be a
government, municipality, or corporation. In return, the issuer promises to pay
you a specified rate of interest during the life of the bond and to repay the
principal, also known as face value or par value of the bond, when it
"matures," or comes due after a set period of time.
3.Municipal bonds (or “munis” for short) are debt securities issued by
states, cities, counties and other governmental entities to fund day-to-day
obligations and to finance capital projects such as building schools, highways
or sewer systems. By purchasing municipal bonds, you are in effect lending
money to the bond issuer in exchange for a promise of regular interest
payments, usually semi-annually, and the return of the original investment, or
“principal.” A municipal bond’s maturity date (the date when the issuer of the
bond repays the principal) may be years in the future. Short-term bonds mature
in one to three years, while long-term bonds won’t mature for more than a
4.A mutual fund is a company that pools money from many investors and
invests the money in securities such as stocks, bonds, and short-term debt. The
combined holdings of the mutual fund are known as its portfolio. Investors buy
shares in mutual funds. Each share represents an investor’s part ownership in
the fund and the income it generates.
discusses only ETFs that are registered as open-end investment companies or
unit investment trusts under the Investment Company Act of 1940 (the “1940
Act”). It does not address other types of exchange-traded products that
are not registered under the 1940 Act, such as exchange-traded commodity funds
or exchange-traded notes.
6.An annuity is a contract between you and an insurance company that
requires the insurer to make payments to you, either immediately or in the
future. You buy an annuity by making either a single payment or a series of
payments. Similarly, your payout may come either as one lump-sum payment or as
a series of payments over time.
7.A certificate of deposit (CD) is a savings account that holds a fixed
amount of money for a fixed period of time, such as six months, one year, or
five years, and in exchange, the issuing bank pays interest. When you cash in
or redeem your CD, you receive the money you originally invested plus any
interest. Certificates of deposit are considered to be one of the safest
savings options. A CD bought through a federally insured bank is insured
up to $250,000. The $250,000 insurance covers all accounts in your name at the
same bank, not each CD or account you have at the bank.
8.Money market funds are a type of mutual fund developed in the 1970s as an
option for investors to purchase a pool of securities that generally provided
higher returns than interest-bearing bank accounts. They have since grown
significantly and currently hold more than $2.9 trillion in assets, the
majority of which is in institutional funds. There are many kinds of money
market funds, including ones that invest primarily in government securities,
tax-exempt municipal securities, or corporate debt securities. Money market
funds that primarily invest in corporate debt securities are referred to as
9.Commodity futures contracts are an agreement to buy or sell a specific
quantity of a commodity at a specified price on a particular date in the
future. Metals, grains, and other food, as well as financial instruments, including
U.S. and foreign currencies, are traded in the futures market. With limited
exceptions, trading in futures contracts must be executed on the floor of a
commodity exchange. Exchange-traded commodity futures and options provide
traders with contracts of a set unit size, a fixed expiration date, and
centralized clearing. In centralized clearing, a clearing corporation acts as a
single counterparty to every transaction and guarantees the
completion and credit worthiness of all transactions.
10.Hedge funds pool money from investors and invest in securities or other
types of investments with the goal of getting positive returns. Hedge funds are
not regulated as heavily as mutual fundsand generally have more leeway than mutual funds to pursue investments
and strategies that may increase the risk of investment losses. Hedge funds are
limited to wealthier investors who can afford the higher fees and risks of
hedge fund investing, and institutional investors, including pension funds.
11.Real estate investment trusts (“REITs”) allow individuals to invest in
large-scale, income-producing real estate. A REIT is a company that owns and
typically operates income-producing real estate or related assets. These may
include office buildings, shopping malls, apartments, hotels, resorts,
self-storage facilities, warehouses, and mortgages or loans. Unlike other real
estate companies, a REIT does not develop real estate properties to resell them.
Instead, a REIT buys and develops properties primarily to operate them as part
of its own investment portfolio.
12.Two of the chief reasons why people invest internationally are:
a)Diversification. International investing may help U.S. investors to spread their
investment risk to companies and markets that are outside of - and different
than - the U.S. economy
b)Growth. International investing takes advantage of the potential for faster
growth in markets outside the U.S., particularly in emerging markets.
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