Curtis has earned the Life and Health Insurance licensure, has passed the Series 66 examination, and has earned a degree from the University of Nevada, Reno. He has over 20 years of experience in the financial industry, helping others protect, grow and manage their wealth. Curtis helps clients create customized strategies for their portfolios based on their unique financial goals.
UNDERSTANDING THE DIFFERENT TYPES OF INVESTMENT VEHICLES
When you look at investment vehicles there is an abundance of different things you can choose from. You can look at stocks, bonds, CDs, mutual funds, ETFs, savings, options, real estate, commodities, and the list goes on and on. For this article, I am going to focus on what most of us deal with on the day-to-day in our investments and that would be stocks, bonds, ETFs, and mutual funds. While many other investment vehicles play an important role in accumulating wealth and helping prepare for retirement, let’s discuss the things we deal with most frequently on a very fundamental level for the purpose of this article.
ETFS & MUTUAL FUNDS
First, let’s look at what most of us find in our plans through work or what we call our defined contribution plans (this would include 401k, 457, etc.). Many of these plans will offer either ETFs or mutual funds, which are essentially a basket of holdings to help achieve an objective. You can find ETFs that mirror the stock market, bond market, or various other investment options. A mutual fund is also a basket of funds that will be used to achieve a certain goal, set by the management criteria of said fund. ETFs historically are cheaper than mutual funds and offer real-time trade execution while mutual funds tend to be a little more expensive (there are always exceptions to this rule) and they trade at the end of the day, not in real time. Depending on your investment objectives and your preference, it should be relatively easy to find either an ETF or mutual fund that would meet your criteria for your investment objectives.
STOCKS & BONDS
The other two main drivers of investment vehicles for the purpose of this article are stocks and bonds. There is a very easy way to differentiate between these two vehicles. First, a stock is taking ownership in a company, hence you are an owner. A stock is normally used to provide a solution for longer-term growth. A bond is basically buying a debt for a fixed interest rate. You will not own a part of a company or entity; you are essentially purchasing a bond where said entity must pay you a fixed amount of interest over time as well as the principal amount. (Note that bond funds work differently than your traditional definition of a bond). A good article that goes into more details about the difference between stocks and bonds can be found here: https://www.nerdwallet.com/article/investing/stocks-vs-bonds
WHERE TO GO FROM HERE
In conclusion, there are all sorts of investment vehicles out there and it is important to understand the foundation and fundamentals of each investment vehicle before deciding which is the right fit for you in a particular situation. This topic could entail multiple novels, let alone a quick blog post. I equate it to buying a vehicle, find the vehicle you want based on what is important to you (safety, engine, durability etc.) and then worry about the color or the interior. Understanding the fundamentals of your investment vehicles will empower you to make the appropriate decisions when figuring out what makes sense for you and your goals. At Cornerstone, we analyze these different investment vehicles to determine which strategy aligns with our clients’ retirement dreams and goals. To see what this looks like for you and to schedule a retirement analysis with one of our advisors, call our office at 775.853.9033 or click here.
Based in Reno, NV,Cornerstoneis for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy.Schedule a timeto discuss your financial goals with us.
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Curtis Slothower
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