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Beginners Guide

Different types of investments in the stock market

Nov 24, 2023

Introduction

There are many different types of investments available in the stock market. Each type of investment has its own unique set of risks and rewards. It is important to understand the different types of investments available before you invest your money.

This chapter will discuss the different types of investments available in the stock market and provide some examples to help you understand how each type of investment works.

Stocks

Stocks are the most common type of investment in the stock market. When you buy a stock, you are buying a small piece of a company. Stocks can be bought and sold on stock exchanges. Dhani Stocks app can be used to buy or Sell Stocks at zero charges.

There are two main types of stocks: common stocks and preferred stocks. Common stocks represent ownership in a company and entitle shareholders to voting rights and dividends. Preferred stocks are similar to common stocks, but they do not have voting rights and they typically pay a fixed dividend.

Examples of stocks include:

Bonds

Bonds are another common type of investment in the stock market. When you buy a bond, you are essentially lending money to a company or government. In return, the company or government agrees to pay you back the money with interest on a specific date.

Bonds are typically considered to be less risky than stocks, but they also offer lower returns.

Examples of bonds include:

Mutual funds

Mutual funds are a type of investment that pools money from many investors and invests it in a variety of stocks, bonds, or other assets. Mutual funds are managed by professional investment managers.

Mutual funds offer a number of advantages to investors, including diversification, liquidity, and professional management.

Examples of mutual funds:

Exchange-traded funds (ETFs)

Exchange-traded funds (ETFs) are a type of investment that tracks a specific index, such as the Nifty50 index. ETFs are traded on stock exchanges like stocks.

ETFs offer a number of advantages to investors, including diversification, low costs, and tax efficiency.

Examples of ETFs:

Options

Options are a type of investment that gives the investor the right, but not the obligation, to buy or sell a specific security at a specific price on or before a specific date. Options are typically used by investors to speculate on the future price of a security or to hedge against losses.

Options are more complex than other types of investments and should only be used by experienced investors.

Futures

Futures contracts are agreements to buy or sell a specific asset at a specific price on a specific date in the future. Futures contracts are typically used by businesses to hedge against price fluctuations.

Futures contracts are more complex than other types of investments and should only be used by experienced investors.

Commodities

Commodities are raw materials that are used to produce other goods. Common commodities include oil, gold, silver, and wheat.

Commodities can be bought and sold on commodity exchanges.

Investing in commodities can be risky, but it can also be a way to diversify your portfolio and protect yourself from inflation.

Currencies

Currencies are the units of money used in different countries. Common currencies include the US dollar, the euro, and the Japanese yen.

Currencies can be bought and sold on foreign exchange markets.

Investing in currencies can be risky, but it can also be a way to diversify your portfolio and protect yourself from inflation.

Conclusion

There are many different types of investments available in the stock market. Each type of investment has its own unique set of risks and rewards. It is important to understand the different types of investments available before you invest your money.

If you are new to investing, it is a good idea to start by investing in a mutual fund or ETF. Mutual funds and ETFs offer diversification and professional management.

Once you have gained some experience, you may want to consider investing in individual stocks or bonds. However, it is important to do your research before investing in any individual security.

Dhani Stocks is a stock trading app that offers a free demat account and zero brokerage on delivery trades. It can be used to buy or Sell Stocks, invest in IPOs, Trade in Commodities and Currencies and for deaing in Futures and Options.

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