What types of Investments are there?

The investor’s goal is to increase the value of their investments over the medium to long term. In addition to capital investments such as shares or bonds, investors also look to investments in tangible assets such as real estate or intangible assets such as patents.

Various investment vehicles

Alternative Investments

In addition, alternative investments do not fit into classic forms of an asset, and there needs to be a clear definition for the use of the term. Alternative investments include hedge funds, private equity (equity capital), art, or investments in renewable energies.

Commodity Investments

In contrast to a direct investment in a commodity, the investor physically owns gold or a gold bar. Investors who invest in gold investment participate in the performance of the commodity’s price fluctuations.

The Futures market

Commodity investments are usually futures or Forward contracts traded on a Futures exchange and are the easiest way to invest in raw materials. However, some risks must be considered when investing in commodity Futures. Most commodities on the Futures exchange are traded in US dollars, exposing investors to US dollar risk with a commodity investment and the chance to earn from a rising US dollar.

The Futures or Forward contracts are standardised contracts that regulate the date and price a certain quantity must be delivered of the respective commodity. Take note, when the futures contract expires, the seller of the futures contract must deliver the commodity, and the buyer of the contract must take delivery of the physical commodity. Investors who want to avoid this swap and smooth out their futures positions can sell long positions (commodity purchases) by buying back short positions (commodity sales). Futures have a limited maturity, so investors must switch to a new contract to remain invested in a commodity after maturity. Switching from one future to the next is called rolling a future.

Another form of investment is a corporate investment. Here, the company invests in the procurement of physical capital to produce goods or maintain and develop the value of services. With the help of investments, companies want to keep and, in the best case, improve or expand their performance.

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