Because in the last article I described the importance of capitalizing on an investment – Fundamental Concept of Investments – Capitalization, today I will talk about the main types of financial investments you can make in America.
You can find the article HERE !
The list below is not exhaustive; this article is meant to be a guide for the most uninitiated, and by no means a complex investment plan.
Thus, below I describe the types of investments you can make on your own. You will see that, depending on your risk aversion, you have several options available, starting from bank deposits and ending with the Forex market, which has gained a great deal of popularity lately.
The Top 5 Types of Investment in America
- Bank deposits and savings accounts
Risk degree: Low
Among the safest investments, savings deposits and accounts are included in the category of savings products rather than in the category of investments.
However, although they have low interest rates, they are important as reserves of money, because they can be exchanged quite quickly in other investments. Also, their interest is capitalized in the long run.
To see what interest rates the banks are currently offering, you can check the updated list HERE!
- Government bonds and bonds
Risk degree: Low – Medium
In the past, government securities were considered the safest investments. The popular saying in the financial environment was “A bank can go bankrupt, but a state never!”.
Well, at present, the situation has changed. The almost non-existent economic growth, combined with the increase of the public debt in the western states changed the perception of the investors on the bonds.
Also, the partial bankruptcy of Greece since the beginning of 2012 has shown that, in extreme situations, even a state in the European Union could end up not fulfilling some of its obligations towards creditors.
As for the obligations of a company, they are safer than the actions for the following reason: in the event that the company goes bankrupt, the first ones on the recovery list are the ones holding bonds. The shareholders are compensated only after all the bondholders receive their money back, and this only if there is still money to recover.
In America you can invest in the bonds listed on the Stock Exchange, and the offer is available HERE.
Risk degree: Medium – High
We climb the risk ladder, and find the shares as an investment option. In Romania, the market for tradable shares is concentrated on the Bucharest Stock Exchange.
The stock market has 2 separate sections: the main section of the BVB, and the RASDAQ section, which lists the companies that have been the subject of the “coupon” since the early 1990s. Unfortunately, the transparency of the companies on the RASDAQ is very weak, and thus it is very difficult. evaluate them. Most of them are traded very rarely, and there is a risk that you will not have to sell any shares that you buy.
Thus, the American companies that are worth investing in are the ones listed on the main market.
Risk degree: High
Derivatives trading is already in a speculative category. The risk is higher, because you can lose most of the money in your account in just a few failed transactions.
To manage this risk, investors and traders make very strict trading plans. If you intend to trade the derivatives market, you must first manage the risk very well.
In Romania, the market for derivatives is not as developed as in the West, but the number of instruments offered to investors is constantly increasing.
- Forex trading
Risk degree: High
Contrary to popular opinion, the Forex market is no riskier than the derivatives market. Risk management is done in a very similar way. Often, derivatives are traded by experienced investors, with concrete trading plans and carefully managed amounts of money. In the Forex market, however, the situation is different.
Thus, the Forex domain has rightly gained a negative connotation: the Forex market has been promoted very aggressively in recent years, and many people without basic knowledge about investments have come to lose their hard-earned money by trading chaotically. Most of them do not have a simple trading plan, without an effective trading strategy.
As a particularity compared to the other derivatives markets, you on Forex trade contracts on the exchange rate differences of the various currency pairs. In order of volume, the most traded currency pairs are EUR / USD, USD / JPY, GBP / USD, AUD / USD, USD / CAD.
Each currency pair must be carefully studied, as their prices are driven by different market events.
To the end
I hope you have made an image of the investments you can make in the financial markets in Romania. There are many other types of investments, such as real estate for rent, but these do not fall into the category of financial markets.
In a future article I will present to you the main types of investments managed. Specifically, the investments you make by entrusting the money to a specialist, such as investment funds.
Until then, I invite you to leave a comment on this article, telling me if you have so far used any type of investment from the above.
What was your experience investing in America?
Are you thinking about diversifying your investments?