Investing Quizlet – What Are the Different Types of Investments?

An investment is any asset into which funds are placed with the expectation of preserving or increasing value and earning a return. Individuals invest because it has the potential to make more money than it costs to acquire or maintain. It is important to remember that investing involves risk which means that an investment’s actual performance may differ from its expected performance.

The difference between saving and investing is that savings is putting aside money you don’t need immediately in the hopes that it will earn more than it does now. Investing is purchasing something with the expectation that it will increase in value or be used for future earnings. An example of this is purchasing a CD that will pay a certain interest rate for the length of time it is purchased. This money will increase in value (purchasing power) over the term of the CD, earning more interest as it continues to grow.

A CD is a type of saving investment that is most useful for people who don’t need the money they are investing right away or for those who want to avoid the risk of losing their investments. An investment that is less liquid than others and cannot be sold quickly is called a(n)

Mutual Funds

A mutual fund is an investment vehicle where individuals pool their money together to purchase a group of securities such as stocks and bonds. This allows for greater diversification than investing in individual securities and provides an opportunity to obtain professional management of an investment portfolio.

Commodity Stocks

Buying commodity stocks is often considered a high-risk investment because the price of a commodity could decline significantly or quickly. However, if the price of a commodity rises, investors will profit from the sale of their shares. A broker is an agent who acts on behalf of the investor in acquiring and selling investments. Brokers can help individuals tailor their investment portfolio to assume the amount of risk they are comfortable with.