Types of Securities

Risk Profile of Different Securities

There are many types of securities, all with different risk profiles that are available to you as a trader.

There are several types of securities that fit all risk profiles and can make investing money easy for anyone. The table below will list a few different investing options and how they can be beneficial to you.

Explore a few of the different securities below:

Bonds
Mutual Funds
ETF's
Stocks
Options
Bonds

Bonds are issued as a form of fund raising. Essentially, the bond issuer is receiving a loan directly from you and promises to pay back the full amount plus interest (coupon rate) by maturity date. This is the safest form of investments because as long as interest rates decrease, the bond value will increase along with the interest.

Mutual Funds

A Mutual Fund is a large pool of money created by many investors which is managed by a professional. The purpose of a mutual fund is to produce capital gains return that matches or is slightly better than the general market (10%). This is considered a safer investment because it gives investors direct access to professionally managed large portfolio.

ETF's

ETF's, or Exchange Traded Funds, are very similar to mutual funds in the way that they are large pools of many investors' capital that is privately managed by a professional. ETF's differ from from mutual funds in the way that ETF's are publicly traded on the open market just like ordinary stock. ETF's normally focus on certain industries of stocks {ex: clean energy, industrial, technology, travel, pharmaceuticals, etc.} Inherently, they can be slightly more risky than traditional Mutual Funds if the selected industry under-performs.

Stocks

Trading Stocks is the most common form of investment. A stock is simply a share of a company. Buying stocks give the underlying company capital to make improvements in the business and hopefully perform better in the future, attracting more investors, and raising the price of shares, making you a profit on your original investment. Stocks are slightly more risky than ETF's since you are basing your outcome on a single company's performance. This is why many investors believe in 'diversification'.

Options

Derivatives, or Options, are the riskiest and most complicated of investments. Options are contracts made between buyers and sellers to gain the rights to buy/sell the underlying stock at a predetermined price. There are many many factors that go into the price of contracts, but these contracts are extremely volatile and can gain/lose value very quickly depending on the % move of the underlying stock.