A Closer Look into Two Different Investment Products and Their Suitability for Investors
If you are planning to make an investment then there are a range of investment products that you can choose from. But before selecting any particular option you need to discuss feasibility of the same with investment planners to be sure you are making the right choice.
In this context, we will look at two popular investment options that you can look into while making a selection.
Different Investment Products and Their Suitability
Investment in Bonds
When you purchase a bond, you are giving a loan to someone (such as a corporation or the government). In return, institution borrowing the money will be paying a fixed amount of interest for a specific period of time and on maturity you get back your principal amount. As such, yield or income from interest received for a bond can turn out to be a good source of income.
There are different kinds of bonds you can select from and best thing to do will be to take help of investment planners to get advice on which type of bond will be right for you. Some of the bonds you can select from are:
• Long, mid and short term bonds.
• Bonds having interest rates that are adjustable (known as floating rate bonds).
• High yield bonds paying higher rates.
• Packages bond like exchange traded fund bonds and mutual fund bonds.
Investment planners can also help in creation of bond ladder having specific maturity dates which are perfectly aligned to cash flow requirements you will have in future. Such investment structure is also called as time segmentation.
Value of Bonds
Usually changes in interest rates will cause value of bonds to fluctuate. However, such fluctuations will not be a factor in case you intend to hold bonds till maturity. Fluctuations in bond's value will be a factor in case you are holding bond mutual funds and requirement arises to sell them to meet your personal expenses. As such, investment planners ascertain your financial position and then only suggest any specific type of bond to invest in.
Thus, bonds are preferred option for those who are not anticipating high returns from their investment in bonds or make a significant profit from capital appreciation. These are the right choice for investors who are more interested in guaranteed principal they will be receiving on maturity of their bonds and are satisfied with income bonds would generate.
Opt for Real Estate Investment Trusts
Another option investment planners suggest is investing in real estate investment trusts (REITs) which are quite similar to mutual funds. There are non publicly traded as well as publicly traded REITs which you can invest in.
These REITs can be part of your diversified portfolio and held within any tax deferred account (like IRA) to get the best tax benefit.
From above details it is quite clear that there are several investment options for you to select from, but you need to select only those which will be right for your investment profile.