An investment, in the broadest sense, is the purchase of something that will appreciate or provide income. The investor initially pays a price for the investment and expects that, with time, the asset will increase in value (or provide income), and yield a positive return on the initial investment.

Many investors are seeking more transparency and looking for the right financial advisor to help with their accumulation and preservation of wealth. At Northbound Wealth Management, we are trained experts that will guide you through each step. We want to keep things simple by helping you discover investments that are right for you while working within your risk tolerance and budget.

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Classification of Investments

Investment encompasses all activities that have the objective of earning profit or some other financial benefit. This includes the purchase of stocks and shares, property, real estate, collectibles and any other instrument that has monetary value.


A stock is a security that signifies ownership in a company. Shareholders in a company are entitled to a proportion of the profits and assets of the company. This can be through dividends or capital gains (profit from the sale of shares when they increase in value).


A bond is a security that represents a debt. A bondholder becomes the creditor of the entity and receives periodic interest payments, as well as the return of the money invested when the bond matures. Bonds are issued by governments, municipalities, corporations, and international entities to raise capital.

Mutual Funds

Mutual funds are a type of investment that is managed by a portfolio manager and that consists of the pooled money of multiple investors. Through this system, the central entity provides investors with diversification, professional management and liquidity. Mutual funds can be found in all types of investments, from bond and stock funds to short-term or long-term financial vehicles.

Exchange-Traded Funds (ETFs)

Exchange-traded funds (ETFs) are securities that trade on a stock exchange and track an index, a commodity, bonds, or a basket of assets. Unlike mutual funds, an ETF does not have a fixed portfolio. It can buy and sell assets throughout the day at prevailing prices on the stock exchange. This allows ETFs to be sold at their current value instead of tracking their net asset value based on the closing price of the underlying securities.


A derivative is a financial contract between two or more parties based on the value of a different asset. These contracts include forward, futures, options, and swaps. A derivative's value is determined by fluctuations in the underlying asset. This can include equities, currencies, commodities, and interest rates. The most popular derivative trade is the futures contract.

Alternative Investments

Alternative investments provide an alternative to mainstream investments. They have historically yielded higher returns to investors at greater risk than mainstream investment options.

Alternative investments may include private equity, venture capital, real estate, commodities, and collectibles. The alternative investment market is much smaller than the traditional stock market but offers a high degree of diversity of options for investors.  The alternative market is one of the fastest-growing and increasingly democratized investment spaces, giving access to more and more investors because of technological advances and growing demand for private investments with different risk and reward characteristics than traditional markets.

What Are IRA to Roth Conversions?

How To Reduce Investment Risk

Although investing is a risky process, there are a few steps that can help you make the right decisions to minimize financial loss. The first step is to identify your risk tolerance level with the help of a financial advisor.

Here are strategies that can be employed to minimize investment risk.

Portfolio Diversification

When assembling a diversified portfolio, investment selection involves choosing individual securities that do not overlap in risk and return characteristics. The greater the number of non-correlated investments, the more likely it is that an investor's return objectives will be met at a lower level of risk.

Hedging Using Derivatives

Derivatives can be used as hedges against price fluctuations in their underlying assets, because the relationship between the two is plainly defined. It is therefore possible to establish a trading strategy by which a loss on one investment is offset by a gain in the derivative.

Asset Allocation

Asset Allocation is the balance between different types of investments within a portfolio (how assets are weighted in a portfolio to achieve a certain objective). When managed correctly, this can help reduce risk and volatility, lessen exposure to economic downturns, provide additional diversification, and improve long-term returns.

Stop-Loss Orders

Stop-loss orders are a tool used to help you protect your profits and limit potential losses. Once it's in place, this strategy instructs shares to be sold automatically when the price reaches a certain level. This may be used to provide protection from sudden market setbacks, as well as to lock in profits.

Frequently Asked Questions

  • Is It Safe To Invest Money?
    Diversification, low-risk investments, and having a well-balanced portfolio of investments is the best way to approach this. A qualified financial planner can help you minimize investment risk by guiding you through the right investments which best fit your risk tolerance.
  • Is It Better To Invest Than To Put Money in Savings?
    As enticing as opening a savings account with your hard-earned dollars may be, it's not going to give you the best return on your investment. When you're investing that money, you open yourself up to a vast array of options. However, it's important to know that there are certain types of investing that can be risky and increase the chance of losing your principal (the original sum you invested). Nonetheless, if the investment is managed correctly and with common sense, your investment can provide you with a better chance of substantial returns than putting your money in a savings account.
  • How Can I Minimize Risk?
    As an investor, you want to maximize potential returns and minimize risk. To do this, you must have a portfolio designed not to lose money. First, you should understand your risk tolerance level—your financial advisor can assist you with that. Additionally, you can employ strategies such as portfolio diversification, asset allocation, hedging using derivatives, and stop-loss orders, among other strategies.

Financial Advice You Can Trust

Your portfolio is one of the most powerful tools in your financial arsenal. But if you want it to be truly successful, you need an advisor with the experience, skill, and connections it takes to guide you through the labyrinth of opportunities available to you today.

Northbound Wealth Management provides financial planning and portfolio management services designed to deliver specific outcomes. Our team of financial advisors draws from the best of wealth management disciplines and applies them to your specific situation, with an objective and pragmatic outlook.

Experience a truly interactive approach to financial planning with Northbound Wealth Management where we tailor an investment strategy towards your personal financial goals. Contact us today.

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