There are three main asset classes: bond, cash, and stocks. Asset allocation involves balancing the portfolio’s risk and return by investing in each of these classes. This will prevent overconcentrating in one area, plus it makes the investment more flexible to move with any change in the economy.
Tactical investing is all about response – looking at the present and trying to make educated guesses about the near future. This is a very active way of investing and is meant for those who want a more constant hands-on approach.
Mutual funds are professionally managed investment funds that are open-ended. What makes them unique is that they consist of a pool of money that comes from numerous investors. This money is invested in bonds, stocks, and more.
An exchange-traded fund (ETF) is similar to a stock since it is also traded on the exchange. They have lower expense ratios and include every type of investment. Unlike mutual funds, the share prices will move up and down throughout the day.
FIAs guarantee a certain amount of interest over a determined number of years. This is in addition to more interest based on the broad market index changing value. These are fixed annuities that are a good way to plan for the future.
Debt instruments are binding promises that can be used to raise capital. Money is provided with the obligation that the investor is repaid.
Stocks and bonds have a similar idea, but they have a main difference. While a stock is a certificate of ownership, a bond is the promise to pay interest – specifically a fixed rate of interest. Those who purchase bonds do not have any ownership.
Private equity investing is very costly, so it is important to be completely sure before making an unfortunate whimsical decision. These are typically for high-risk and early stage business ventures and will require a minimum investment. While there is a lot of risk, a wise and informed decision could lead to a huge return. At Legacy Financial Partners, these informed decisions are our specialty.
Real Estate Investment Trusts (REITs) are a way to invest in real estate, such as apartments, hotels, and warehouses. Public REITs are commonly bought and sold through stock market exchanges, but private REITs are not. This is the biggest difference between the two – access. Those interested in investing in private REITs must be accredited investors.
Uncertainty regarding investment decisions is common and it is best to turn to someone who is experienced and knowledgeable in the world of finance. Legacy Financial Partners can help analyze current financial situations and use this information to make informed suggestions based on the individual’s unique situation. Please contact us today to schedule a meeting.
If you’d like to hear more information about any of our products or services, schedule a meeting today or register to attend a seminar.