Investments: The Bedrock Of Trading CFDs

Investments and investing are two terms that need to be familiarized with when trading CFDs. Going back to the early days, the concept of these two terms originated sometime in the 17th and 18th centuries. During these days, there were existing public markets that provide investing opportunities to investors. Amidst industrial revolution (1760-1840 and 1860-1914), banks such as Goldman Sachs and J.P. Morgan dominated the trade via banks. Nowadays, the digital world with the aid of computers and other gadgets  have made trading, researching and investing a lot easier than how it was centuries ago.

Investment and Investing

Based on the definition of Consumer Financial Protection Bureau (CFPB),an investment is something that is purchased in order to gain profit in the near future. Investing on the other hand is  the process of allocating your assets to generate income. When these two terms are combined and applied, the individual who performs it can be regarded as a trader.  In this post, we aim to further educate you by discussing the form of investments that will help you trade better.

5 Types of Investments

There are various types of investments and here is a list and characteristics of the 5 common investment types.

1. Options and Derivatives

Options and derivatives are investment types that involve contracts. Derivatives by definition is a financial instrument whose value emerges from a different instrument such as stocks or index. Both Options and CFDs fall under derivatives. Because of their nature being leveraged form of investment, both options and CFDs are good avenues for rewarding profit but these rewards are twined by a very high level of risk.

2. Stocks

This type of investment is one of the most commonly picked trades because of its characteristic to make the trader enjoy rights as a part owner of a company or establishment. In order to gain a return of investment for stocks, a trader may either rely from dividends or decide to trade his shares in the market.

3. Bonds

Bonds are instruments that give a trader the privilege to profit from periodic interest payments as well the return of the face value of this merchandise the moment it reaches its maturity. 

4. Commodities

These are the necessary resources that are usually traded by different countries to their partners. As a regular trader, metals, oil, grain and animal products,  and currencies can be dealt with via commodity futures.  Futures are also derivatives that allow traders to buy or sell a specific quantity of a commodity at a specified price on a preset date.

5. ETFs

ETF is an acronym for exchange-traded fund. ETFs work like mutual funds but it is easier to deal with as it can be  instantly bought and sold in the market. It’s cheaper cost compared to mutual funds also makes it an enticing form of investment for traders.

Conclusion

With this lesson we have learned that there are various choices for investments and purchasing one from these suggested options will start your investing journey. Let us learn from the people who are into derivatives such as trading CFDs, who have witnessed the reality that both investment and investing bring promising profit but success in this field means readiness to face and mitigate the risks that come along with it.