Investments in which you lend your money
These types of investments are going to make you basically the bank. What I mean by this is that you will be the one who lends money to third parties in exchange for the payment of interest in your favor. These types of investments are considered to have lower risk than investments in which you have an asset, therefore the returns are usually lower.
When you buy a bond what you are doing is essentially lending money to some entity, be it a business or a government among others. In exchange for your money you receive a certain interest rate, as well as the initial capital once the bond reaches its maturity.
These types of investments are usually considered safer than stocks, but they are not without risk. A government can end up defaulting on its obligations and a company can go bankrupt.
6. Bank deposits:
You lend your money to the bank for a specified time in exchange for predetermined interest. Once the period established with the bank has elapsed, you receive your initial capital. Normally the longer the bank deposit lasts, the higher the interest received.
They do not tend to be risky types of investments, since the money is insured by governments. So if your bank fails you are going to get your money back anyway.
Just make sure you don’t need the money during the investment period, as there are often high penalties for early withdrawals.
Crowdlending, also known as Peer-to-Peer (P2P), consists of lending money to individuals or companies in exchange for interest. Normally the money invested in this modality is distributed among many different loans, which leads to diversify and reduce risk.
This system allows both those who ask for money (borrowers) and those who lend it (lenders) do not have to resort to the traditional banking system. This is achieved through the use of online platforms that connect investors with borrowers.
To be honest with you, funds are not actually investments per se, but rather investment vehicles. What I mean is that the funds are used to invest in both stocks and bonds, as well as many other assets such as real estate.
Mutual funds have become very popular in recent years as they are a very simple and convenient way to invest. They allow you to easily diversify between many types of investments without the need to have great knowledge of the financial markets.
There are many different varieties of mutual funds, but here are the most popular ones.
8. Mutual Funds:
A mutual fund is an investment vehicle made up of the money of many investors in order to invest in different kinds of investments such as stocks or bonds. These classes of funds are managed by professional managers who invest the fund’s money with the aim of producing capital gains and / or income.
Mutual funds are one of the most popular types of investments, allowing you to invest in many asset classes quickly and easily. They also enjoy a high level of diversification and the management of experts who in exchange for their work charge a commission.
ETF comes from English and stands for Exchange-Traded Fund. This class of funds is traded on the stock market as if they were shares, therefore their price fluctuates during the day.
They have become very popular in recent years as they are passively managed and have very low commissions.
While ETFs can be purchased directly on the stock market like stocks, mutual funds are created and marketed by various fund managers.
This class of funds enjoy high diversification thanks to the fact that they invest in many types of assets. ETFs can contain many types of investments such as bonds, commodities, stocks, and much more.
ETFs often try to track the returns of certain indices, especially stocks like the S&P 500 or IBEX, although they can also invest in stocks in specific industries.