POSCO investing $20 billion in its quest to be world’s top EV materials player and topple Chinese rivals
West Vancouver’s Abeir Haddad Shares Four Different Types of Investments
People who are interested in investing have many avenues to explore. Different types of investment have their advantages and disadvantages, and investors should fully educate themselves about the particulars of each investment before putting in any of their hard-earned money.
Abeir Haddad, an entrepreneur and investor from West Vancouver, BC, Canada, explains four of the most important types of investment and how you can benefit from each. He also shares some of the possible problems of which investors should be aware.
Stocks represent shares in the company issuing the stock. Stock investing is how an ordinary person can share in the largest companies' success. Stocks enable companies to raise money to fund new products, company growth, and other initiatives.
When you buy stock, you are effectively purchasing a small ownership stake in the company. This means that you have rights as a shareholder, especially when voting in annual elections.
Abeir Haddad says that the main reason people buy stocks is to earn returns on their investments. There are two major avenues for making money from stocks: price appreciation and dividends. With price appreciation, you can sell the store for a higher price than you paid, making money from the sale. With dividends, you may receive quarterly payments from the company that comes from its revenue.
Over the long term, stocks tend to produce a return rate of about 10 percent, or 7 to 8 percent adjusted for inflation.
People who want to invest in stocks should know that the prices can be volatile and that returns are not guaranteed. Some stocks outperform the expected annual gain, but many more slump in value, causing investors to lose money. This can happen because companies have less than optimal earnings or because the market as a whole has gone down.
Bonds are fixed-income instruments that represent loans made by the investor to the borrower. In this case, the borrower may be a company or the government. A bond may be considered an I.O.U. between the borrower and lender that shares the details of the loan and corresponding payments. Companies, provinces, municipalities, and national governments use bonds to finance their operations and special projects.
One of the advantages of bonds is that they generally pay the promised rate of return. This means that the borrower’s money is not exposed to the vagaries of the stock market, but it also means that they are missing out on the rewards associated with risk.
It can be a great strategy for borrowers to balance stocks and bonds in their portfolios to allow for some guaranteed income and the amount that is tied to the stock market. Canada’s real return bonds rate is at about 0.14 percent.
3. Real Estate
Real estate can be another profitable investment if it is managed well. Real estate investors can buy buildings, land, and other forms of property. Real estate generally carries a higher rate of return than stocks over the long term. Trying to “beat the market” on real estate is not recommended because real estate is not a liquid investment. This means that if an owner wants to sell a real estate investment for cash, it can take months or, in some cases, years to sell the property.
This illiquid state is one of the primary disadvantages of real estate. Real estate is also subject to industry trends. Changing conditions in the economy and the local area can also cause prices to fluctuate.
If an investor wants to get into real estate but wants a liquid investment, it is a good idea to try a Real Estate Investment Trust or REIT. With a REIT, investors can purchase as much or as little share in real estate as they want. The investment is easily liquidated, and the investor receives the same type of returns as someone who owns an entire building.
4. Foreign Exchange
Foreign exchange trading or forex is for experienced investors only. It is a high-risk, high-reward form of investment. Forex traders in Canada can profit from price movements in the international currency markets. Online brokers provide access through various trading accounts and platforms.
In Canada, forex investors generally invest in the Canadian dollar paired with other world currencies. Investors need to keep a close eye on the indicators that predict the course of the Canadian economy, like crude oil and gold prices.
Forex trading can produce a great deal of profit if investors play their cards right, but it can also expose them to significant risks. Forex investors should know that their investments are far riskier than the stock market or real estate. Most traders enjoy the exhilaration of trading in foreign exchange, but if investors are unwilling to accept the risk, they should opt for another type of investment.
Exploring Investment Options
Abeir Haddad has shared these four investment vehicles as options for Canadian investors. Investors are encouraged to fully research each type of investment before they decide where to put their money. In addition, they should always diversify to moderate the effect of any major movements in the economy.
This article does not necessarily reflect the opinions of the editors or the management of EconoTimes