Definition Definition

What Is Investment Vehicle? Types of Investment Vehicles and Practical Example

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 -

  1. Ownership Investments
  2.  Lending Investments
  3. Cash Equivalents
  4. Pooled Investment Vehicles

There are four primary asset classes that these investment vehicles are further categorized into -

  1. Equities / Stocks
  2. Bond
  3. Real Estate
  4. 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.


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