- Direct Investments – Investments in which you acquire a direct ownership interest in the company by becoming a stockholder or a partner. There are two types of direct investments you can make in the securities market.
- Bonds – A bond is a debt security; you are lending money to a government, municipality, federal agency or other issuer. You get a specified rate of interest during the life of the bond and are repaid the initial value of the bond plus interest when it matures.
- Stocks – In exchange for the purchase of company stock you receive an ownership stake in the company. With stocks you must endure the ups and downs of the economy.
- Indirect Investments – Financial arrangement in which you empower a third party to invest on your behalf. Typically, indirect investments are pooled with other investors to limit the risk involved. This is the most common type of investment that people select. The following are popular forms of indirect investments:
- Mutual Funds – Consists of money contributed by many people to a common pool. The fund then uses the money to invest in many different companies.
- Investment Trusts – Similar to mutual funds except the nature of the investments may be different.
- Venture Capital Funds – Usually refers to funds that are raised and pooled together for the specific purpose of investing in a start-up company or an early stage business.
- Savings Account and Whole Life Insurance policies – Interest bearing account or premiums paid to life insurance.
Investors often use brokers to buy and manage their investments:
- Brokers – Full service brokers research stocks, give advice based upon that research, and monitor your stocks.
- Discount Brokers – With the evolution of the Internet there are many firms and websites that offer brokerage services at a discount. Although you pay for the price of the trade, you have to do your own independent research and manage your own investments.
Consultation with a financial attorney for most investment decisions is probably unnecessary. However, if there a dispute with your broker, such as when you lose a significant part of your investment based on the bad advice of a broker, you should speak to a lawyer immediately. An experienced investments lawyer will help to explain your rights as well as preserve any possible remedies you may have.