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Investment Vehicle

By Edited Nov 28, 2015 0 1
Investment Vehicle

Whenever people hear the words investment vehicle, they often think long-term, because a lot of the time when you invest money, you are normally putting it into something for a specific amount of time in the hope that it will appreciate in value.

Investment vehicles come in all different forms: there are long-term investment vehicles and short-term investment vehicles and it really is a case of what you are actually looking for in terms of return. If you have money that you do not need to use for a long time then it is worth looking for long-term options, but obviously if you can only tie up your money for a short period of time, then you will likely search for a short-term investment vehicle.

What Are Some Common Types Of Investment Vehicles?

Shares of stock or high dividend bonds are great if you are looking for an investment vehicle that can give you a current income in addition to potential appreciation, because these can give you regular dividend payments. Sometimes people invest in them when their children are very young so that when they are older and attending college or university it can help pay for tuition.

Another common investment vehicle that is a long term option is a retirement plan whereby people choose to pay in a certain amount of money each month. Over the years it accumulates, and hopefully when you are at retirement age, you will have had a sufficient return on your investment such that you can afford to no longer work. This investment vehicle is also used by a number of people who just want a good return on their money and don't mind that they can't touch it until retirement age. The most common types of retirement plans are IRAs (Individual Retirement Accounts) and 401(k) plans.

What Do I Do If I Can't Afford To Risk Losing My Money?

Capital preservation is type of investment vehicle strategy normally used by conservative investors who can't afford to take risks, because of its relative safety. This strategy exists when their money is invested in safe institutions such as banks (in savings accounts or CDs). You'll often see some elderly people using this strategy because they need to be sure that their money will outlive them (in other words, they need the money to be able to afford living expenses before they die). These people do not like to take risks with their money because, as retired individuals, they may not be able to replace it.

Always Consider How Much Risk You Can Handle Before Investing

Overall, when you are deciding to utilize an investment vehicle, you need to take a little time and think about exactly what you want in terms of risk and return. Yes, we all want to make money from our investments, but we need to think about what amount of money we need to keep available for expenses, and how long we can wait for our investment return to materialize. Sometimes patience is key, but it won't do you any good if you haven't properly planned your strategy and figured out how much you can safely risk without affecting your monthly living budget.
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Comments

Aug 8, 2010 12:41am
Sookie
good information here. Thanks for the article!
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