Stocks
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).
Bonds
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.
Derivatives
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.
