What is Investment Vehicle?
An Investment Vehicle is a tool that investors utilize to make money. Certificates of deposit (CDs) and bonds are low-risk investments; stocks, shares, and exchanges, on the other hand, involve a higher level of risk. Annuities, artifacts such as artwork or coinage, mutual funds, and exchange-traded funds (ETFs) are examples of other investment vehicles.
Understanding Investment Vehicle
An investment vehicle is something via which people or companies can invest and, presumably, develop their money. A good number of these vehicles are available, and many individuals opt to include at least a few in their portfolios. Diversifying a portfolio with different types of investments reduces risk by diversifying the assets in the portfolio. Diversifying a portfolio with alternative assets will, on ordinary, result in higher long-term returns.
Types of Investment Vehicles
Four major types of investments vehicles are most common in the marketplace as of now and they are listed below -
- Ownership Investments
- Lending Investments
- Cash Equivalents
- Pooled Investment Vehicles
There are four primary asset classes that these investment vehicles are further categorized into -
- Equities / Stocks
- Bond
- Real Estate
- Cash
Bonds and property investments are commonly referred to as "fixed income" (grouping them). It’s because they generally create a consistent guaranteed income or compensation over a set length of time (monthly, quarterly, etc.). If you invest in securities, you will receive a set income from the firm or government as it repays its loan with interest. For example, if you buy a property, such investment returns could come from a renter or occupant who pays rent monthly.
Practical Example
David is a financial advisor collaborating with a prospective client named Monica. She is assisting Monica with developing a diversified investment portfolio utilizing several investment vehicles that fit her financial objectives and risk tolerance. It has enabled Monica to make more productive ventures.
In Sentences
- The term investment vehicles are used for shares, bonds, assets and securities.
- Investment vehicles are frequently used between clients and financial service providers.