Types of Investments

by Isabel Prontes ; Updated July 27, 2017

There are various types of investments. Investments are, essentially, items or assets that have values that are bought for either capital or income appreciation. Generally speaking, when one makes an investment, she hopes to use money in order to make more money in the future. Investments entail the expectation of positive financial returns in the future.

Types

There are three main types of investments: stocks, cash and bonds. These investments are also commonly referred to as "asset classes." Many people consider assets such as homes to be investments because of advantages like tax breaks.

Stocks

Stocks are investments that have some of the best growth opportunities over long periods of time. Stock investments also come with the largest amount of risk. They are categorized as either being international or domestic. If someone was to purchase--say--100 shares of a company like Citibank, that would be an example of a stock investment.

Cash

Cash investments symbolize short-term instruments. These offer more strength and protection for investments. Unlike stocks, cash investments offer slimmer chances for growth and also come with the lowest amount of risk. Some examples of cash investments are certificates of deposits (CDs), bank accounts and money market funds.

Bonds

Bonds represent loans to either corporations or the government, and are supposed to offer steady, consistent fixed income. Bond investments are somewhere in the middle of cash and stocks investments; they come with a moderate level of risk. Commercial bonds are established by companies, and people can generally invest in these through pooled funds with others.

Mutual Funds

Mutual funds are collections of stocks and bonds. When someone purchases one of these funds, they combine their money with various other investors' money; this makes all of the investors in the group capable of paying a professional to pick out specific securities for their needs. These mutual funds are organized with strategies in mind, and can have any different kind of focus, whether it's small stocks, government bonds, industry stocks or large stocks.