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What are the main types of Investments?
Equities, bonds, funds, financial markets, investor profile, return, risk… It’s hard to take the plunge when you’re overwhelmed by all these terms… It’s often the first thing that stops us: “I don’t know anything about it”. Here are some explanations of simple words that seem complicated.
Shares
When you buy a share in a company, it means you own a small part of it.
It is possible to receive part of the company's profits in the form of dividends. The remainder of the profits generated will increase the value of the company and therefore of your investment.
Funds
Investing in a fund means buying a basket of equities, bonds or other investment products.
The value of your units increases according to the fund's performance.
Bonds
When you buy a bond, it means you loan money to a company or a State.
In general, you can earn periodic interest on your investment.
Play the video : What are the most common securities?
What are the most common securities?
Explanations by Philippe Ledent, Senior Economist at ING Belgium.
‘What you need to know to build a securities portfolio’ by Philippe Ledent, Senior Economist - ING
Part 2 - The Three Most Common Investment Products
There are three main types of investment products:
Bonds, Stocks, and Investment Funds.
1. Bonds
A bond is a form of debt issued by a company or a government.
When you buy a bond, you're essentially lending money to the issuer in exchange for a fixed income, known as a coupon, paid annually over the life of the bond.
• Bonds have a maturity date, at which point the issuer repays the principal.
• You can choose to hold the bond until maturity and simply collect the coupons.
• However, bonds are also traded daily on financial markets, meaning their value can rise or fall depending on various factors—especially interest rate fluctuations.
• This introduces a risk: the bond may gain or lose value over time.
• Additionally, there's a credit risk: the issuer (company or country) might not be able to repay the debt at maturity.
2. Stocks
Stocks are entirely different.
When you buy a stock, you become a partial owner of the company.
• As a shareholder, you're entitled to a share of the company’s annual profits, known as dividends.
• Stocks have no maturity date—you own them as long as you keep them.
• Their value fluctuates daily based on market conditions and the company’s performance.
• You can sell your stock at any time, potentially making a capital gain or a loss.
• Stock markets are generally considered riskier than bond markets because the performance of a company can vary significantly.
3. Investment Funds
Investment funds are typically a combination of stocks and bonds.
• A fund manager selects and manages a diversified portfolio of assets.
• The manager may also focus on specific themes or sectors they believe in.
• If you share their vision, investing in such a fund can be a good option.
• You pay annual management fees, but the manager makes the investment decisions for you.
• Since the fund is diversified, your money is spread across multiple assets, reducing risk.
There are other types of financial products—like derivatives or more exotic instruments—but these are generally suited for more experienced investors.
In such cases, it’s best to seek professional advice.
I've made up my mind, I'm going to take the plunge!
