- “Cash”. Money in the bank as money markets or CDs is fairly safe but it rarely grows as much as inflation. You can park money here for awhile but it best used for short-term needs. These are not really considered investments but are there are monetary needs.
- The “Market”. This is a big word. It means publicly traded securities such as stocks and bonds. Funds like mutual funds and ETFs (Exchange traded-funds) are just combinations of stocks and bonds. Stocks are where you are an owner in a company. Bonds are where you are loaning money to companies that need to borrow money for various reasons. Bonds pay interest and Stocks pay dividends. There are Growth stocks and Value stocks. Growth stocks are companies that are re-investing their profits back into the company with the intent to grow. Value stocks are companies that pay out their profits to shareholders as dividends and are less focused on growth.
- “Annuities” and “Insurance”. There are many different kinds of annuities but they are provided by insurance companies. One of the primary objectives of annuities is protection against market downturns. The insurance company may absorb some of the risk that your retirement income drops if the market drops. Insurance is broad but basically the insurance company is intended to assume the risk of someone dying, a house burning down, needing nursing home care, or poor market performance.
- “Alternative Investments”. These are intended to invest outside of the “Market”. There are different kinds but they are most commonly focused on Real Estate. You can buy rental property for income and that would be an Alternative investment but if enough people pool their money to buy lots of properties, you can benefit from diversification and the guidance of professional real estate experts.
By Cammie Humke, Investment Adviser at The Humke Group, Inc Located at 555 S. Randall Rd in St. Charles, IL, phone 630-584-7343
The Humke Group, Inc is an independent firm offering securities through Summit Brokerage Services, Inc., Member FINRA/SIPC. Advisory Services offered through Summit Financial Group Inc., a Registered Investment Adviser. Opinions expressed are that of the author and are not endorsed by the named broker/dealer. All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.