The Two Types of Investing – Physical Cash Investing and Financial Spread Betting
To invest simply means to put money into an investment with the hope of a profit / return in the near future. Simply put, to invest simply means that you are buying an asset with the intention of making a profit / return on your initial investment which could be an appreciation in the price of the underlying asset over some period of time or an increase in the overall value of the underlying asset. So in simple terms an investment is an agreement or contract between two parties where the party investing receives an asset in exchange for an interest or payment. There can be different types of investments depending upon the nature of the contract but essentially these types of transactions are all about putting money into an investment and expecting a profit / return.
Most people will agree that there are various types of investments and some of these include stocks, bonds, mutual funds and property. However, when you start investing in your first little black book, you may not have all the knowledge it takes to choose the best investments for you. It’s not always about knowing what you are doing but more about knowing who you are doing it with. This is because not everyone can invest in the same thing. You will find that some people may invest in stocks and bonds and other people may invest in property or real estate.
So depending upon your preferences and needs, you should narrow down the investments you would like to make. For instance, you can invest in fixed income securities such as bonds, gilt, mortgage-backed securities and notes, commercial loans, and equities such as equities in manufacturing companies, energy resources, property, and financial derivatives. These all provide a higher price appreciation than the lower priced stocks and bonds and also give you a higher chance of receiving a benefit to your principal investment.
There are also other special kinds of investment options that are quite preferable to investors. One example is commodities investing. This involves buying commodities such as petroleum, gold, silver, wheat, cotton and other basic agricultural products at a lower price and selling them at a higher price once they mature. However, when it comes to commodities and financial instruments, you should be careful. Some commodity contracts are actually futures contracts which are put into effect at a later date; for example, a farmer putting out his fields with seeds one year and harvesting the same the next year.
A very common type of financial instrument investing includes options trading, penny stocks, high risk investments in derivatives, fixed rate deposit interests, time deposits, and even micro cap stocks. All these are known as financial instruments, but each one of them has its own set of characteristics that can make them attractive to investors. Dividends are a great example of an attractive feature of all these investments and when you include reinvestment in dividends along with the total return you get from your reinvestment, you end up with a very attractive option for investors looking to earn high returns on their money.
Another form of investing is speculation. Speculation is not about buying something today and selling it tomorrow so it does not make sense within this context. Speculation is all about looking at the market at different times and coming up with an opinion as to how the market will react. If you are speculating on whether or not an investment will rise in value, you are not actually holding the asset overnight in your hands. Holders of these types of investments are looking to ride the trends that occur over time and to look for a set pattern that will indicate that an investment will continue to rise in value.