7 Types of Investments Entrepreneurs Should Know About
While the salaried may have a retirement scheme facilitated by their employer, entrepreneurs have to sort their financial future out. Their best is to make wise investment decisions. Where to start is the concern of every wannabe investor.
Types of Investments
You may have heard people talk about investment options using terms such as growth investments, defense investments as well as fixed interest. All of them are great options and incorporated into the seven types we are going to discuss below.
Here are the investments that any entrepreneur should be thinking about for a secure financial future.
1. Treasury Bills
Anyone considering investing their hard-earned cash will have risk as their topmost concern. No one wants to lose their money in some investment scheme. For almost risk-free investments, Treasury Bills are your best bet.
However, this means that the returns will also be minimal. Treasury Bills are bought through a mutual fund or an ETF (Exchange Traded Fund). Annual returns may go up to 3%.
2. Certificates of Deposit
This is another safe bet where risk is concerned in investment. Certificates of Deposit are availed by just about every bank. The FDCI insures every depositor to the tune of $250,000.
One advantage the investor enjoys has to do with taxation. However, the returns on this product are quite low. A short term CD may attract rates that begin as low as 0.10%.
3. Government Bonds
These ones are issued at municipal, state and federal levels. The safest bonds are the federal ones as cities and states often experience financial challenges that would affect your investment. Boostcredit101 offers more information on investment options.
Government bonds offer better returns than Treasury Bills and CDs. As they have full government backing, you have less to worry about with regard to loss of investment.
4. Corporate Bonds
You loan money to a large firm and it pays you back with interest. That is known as a corporate bond. One way you can own bonds such as these is by buying them via ETFs and mutual funds.
The rates offered by corporate bonds are better than government bond ones for the most part. However, should the company you have invested in go under, then you stand to lose some of your investment. This is because bondholders have no guarantee that they will have their full investment back.
5. Preferred Stock
The investor is guaranteed a payment every quarter but you are not given an expiration date at the end. As a preferred stockholder, you get paid after the bondholder but before the common stockholders should the company go under.
One downer is that you are not given a vote which means you do not have a say over the company’s future. However, you are safer and more secure in comparison to a common stockholder. Also, you can convert your stock into bonds or common stocks.
6. Common Stock
Many investors prefer this as an investment option as they tend to do relatively well in the long run.
7. Options and Futures
Options: they give you a chance to buy stock or any other asset at a particular price on a set date.
Futures: much like options except that you will make an agreement to buy at the future date.
Either way, you run higher risks with these options and many investors tend to give them a wide berth.
You can get a lot more information on investment options from a website such as Boostcredit101. Entrepreneurs must be meticulous in planning their retirement and future savings.