Investment 101: Passive, Active and Advanced Investments

As a new investor, two main options are usually open: Mutual Funds or Individual Stocks. Determining what investment choice to prefer depends on the style you want to adapt. Would you be the conservative or the aggressive type? As differentiated by InvestorGuide.com, “Mutual funds are widely regarded as a passive form of investing, while investing in individual stocks is a more active form. Both carry inherent advantages and risks, and it is important for investors to understand the differences between them.”

More options become available once you learn the basics. You’ve got ETFs and investment trusts, as well as property and retail investment. Bullion Vault is a good example of a website that offers safe and secure retail gold investment. Gold is considered one of the more stable commodities in the trade market so considering this path may be ideal for someone wanting stable financial investments.

And if direct (individual) stock investing is starting to bore you, jumping into a mature Forex market proves to be a good option as well.

However, please always remember that the more complicated an investment becomes, risks evidently rise as well. Thorough education should be performed and reviews should be considered on the online platform you’ll be using. Beware of scams! You don’t want to give away your hard earned money that easy, do you?

But before going into more advanced investments, make sure you know the basic alternatives. For all you know, the basic may be just all you need.

Mutual Funds

As a newbie’s main option, these funds are automatically diversified. In more developed countries, mutual funds offer a large variety from sector based funds like tech, retail, or energy, up to commodities and foreign indexes. They comprise a large number of stocks, each representing just a small percentage of the portfolio. Because of the diversified spread, this characteristic is both the strength and weakness of this option. A rally in a big share may barely affect the whole fund as it’s only a small part of the whole. On the other hand, a big drop on a prominent invested company’s holdings will be cushioned thanks to the small share portion it has in the whole fund pie.

Individual Stocks

For adventurous investors-to-be, “picking individual stocks for a personal portfolio is the favored choice,” according to InvestorGuide. Individual stock investments in just one company or a few choice public corporations is a high reward, high risk affair. The total amount put in can be a complete loss of the principal amount or an exponential gain. In order to counteract the high stakes, choose a small basket of stocks to counterbalance, diversify and minimize risk. “As a general rule of thumb, the more stocks in a portfolio, the better it is protected from volatile market movements,” InvestorGuide highlights.

It’s always best to consult an advisor before really committing in an investment. Learning the ropes before going into a situation will always be the wise choice.

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