9 Types of Investment You Need to Know

9 Types of Investment You need to know

As the digital world grows, more people are starting to understand the importance of investing and managing finances. Not only adults, but many young people have also started their own investment journey. For those of you who are just starting to invest, let’s first understand what investing means and its benefits.

Investment Meaning

In short, investment is an activity to invest money or valuable assets into an object or institution and other parties with the aim of gaining profits after a certain period of time. Investing is said to be a way to multiply assets without making any effort. In other words, investment is also a passive income that gives you an income without doing any work.

Generally, investments are made by investors to achieve several goals such as gaining profits, developing companies, guarantees in doing business, protecting assets from inflation, and also saving funds for the future.

Most investments are made as part of long-term financial planning such as retirement funds, buying a house, business capital, and so on. However, there are also some people who make short-term investments for their daily needs. 

Most Popular Investment options

If you are a beginner who intends to dive into the world of investment, you must be confused about choosing the right type of investment.  Each type of investment has its own risks and advantages, so you must be more careful to choose it. Here are popular types of investments that you can try.

  • Mutual Fund
    This type of investment is popular with beginners because the risk tends to be low so it is suitable for starting while learning.  Mutual Fund is an investment that pools investor money into a single pool and the funds are then invested in the stock market.
    There are several types of mutual funds that you need to know about, such as money market mutual funds, fixed-income funds, stock mutual funds, mixed funds, and index funds. Each type has different potential risks. Beginners usually invest in money market mutual funds because this type has the lowest risk. Meanwhile, those who prefer higher returns with higher risk usually invest in stock mutual funds.
  • Stock
    This investment has the potential for high returns but the risks are also high. However, this type of investment is still the most popular type of investment in Indonesia and other countries. For this type of investment, you will invest money into a company by purchasing their shares. The more shares you buy, the bigger your company ownership will be.
    The return on the stock investment itself usually comes from dividends and also the appreciation of the value of the stock. Dividends are taken from the company’s earnings. However, not all companies distribute dividends to their investors. Some companies that do not pay dividends use the money for business development. Stock investment requires in-depth understanding and analysis. There are many factors that need to be considered in order to avoid losses. As such, the risk of investing in a stock is higher.
  • Gold
    Gold investment is one of the most popular types of investment in Indonesia. If you are looking at long-term and low risk investment, gold should be one of your top choices because the price always increases over time. In addition, the risk of loss is quite low so it is suitable for those of you who prefer to play it safe. Today there are many ways to invest in gold. If you want to purchase physical gold, you can choose gold bars. You can also buy gold digitally on several digital investment platforms so you don’t have to worry about where to store it.
  • Bond
    Bond investment focuses on buying and selling medium to long-term debt securities.  This debenture contains an agreement from the issuer for the payment of compensation in the form of interest within a certain period and for repayment of the principal debt at a time determined by the letter holder. This investment is guaranteed by the government so that it tends to be safer and more secure because the risk of payment failure is minimal. This type of investment is suitable for those who want a low risk investment.
  • Deposit
    This type of investment is very similar to the concept of saving. You deposit your money in a bank or institution and keep it for a certain period of time to earn interest. The difference is that on a deposit you cannot withdraw your money before its maturity. Deposit’s interest rates also tend to be higher than savings’ interest rates. The more amount of money deposited, the higher the interest rates.
  • Property
    Property investment is typically low risk and guarantees high returns.  The increase in the value of land and property can reach 15-20% annually, making it a very promising asset, especially if the location is very strategic, because the property is a primary need, the return of investment is typically higher than other types of assets. However, of course, this investment requires very high capital as well.
  • Unit Linked Insurance Plan
    This type of investment is a combination of insurance and fund management such as mutual funds. This type of insurance also provides investment benefits which allows you to withdraw after a certain period of time. As there is a combination of insurance and investment functions, the premiums paid are usually much higher. However, this is very suitable for those who require insurance coverage and wish to invest using the same funds.
  • Peer to Peer Lending
    The type of investment peer-to-peer lending is increasing in demand as fintech develops in Indonesia. This is because the return offered is very high and not much capital is needed. There are several fintech companies that offer returns of 18% per year. Tempting isn’t it?
    Peer to peer lending lends money to those in need and gains profits from the return of the funds. It is increasingly popular not only because of the high returns but also because it is safe, easy and secure. All you need to do is download the p2p lending app to start investing.
  • Cryptocurrency
    Ever since Bitcoin’s price shot up to hundreds of millions, crypto has become high in demand.  However, this investment also carries a very high risk even though the return obtained is also very high. In-depth analysis and patience are required to make a profit on this investment.
    Crypto is a digital asset generated from blockchain technology. Several types of crypto-assets exist in the form of tokens that can be used as a means of payment in the digital world. Even though the risk of investing in this asset is very high, many people are still interested in investing in it because of the huge profits and also because of the potential of blockchain technology which is a new tech breakthrough.

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