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10 Basic Investing Principles - Principal 3 - Investment Vehicle

10 Basic Investing Principles - Principal 3 - Investment Vehicle

| April 26, 2023

Topic 3: Investment Vehicles


Investment vehicles are different types of financial products that allow you to invest your money. Some common investment vehicles include mutual funds, exchange-traded funds (ETFs), individual stocks and bonds, and annuities.

Mutual funds and ETFs are both investment products that allow you to invest in a diversified portfolio of stocks, bonds, and other assets. These funds are managed by professional money managers who choose the investments for the fund based on the fund's investment objectives.

Individual stocks and bonds allow you to invest in specific companies or organizations. When you purchase stock in a company, you are buying a share of ownership in that company. When you purchase a bond, you are essentially loaning money to the organization that issued the bond, and you will receive interest payments in return.

Annuities are investment products that provide a guaranteed income stream in retirement. Annuities can be either fixed or variable, and the returns on annuities depend on the performance of the underlying investments.

Each investment vehicle has its own benefits and drawbacks, and the best choice for you will depend on your investment goals, risk tolerance, and personal preferences. It's important to work with a financial advisor to determine which investment vehicles are right for you.

Disclosure: Investing in mutual funds involves risk, including possible loss of principal. Fund value will fluctuate with market conditions and it may not achieve its investment objective. ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF's net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors. Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.