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पाठ 2: Types of Investment

Types of Investment

 

IUX is a platform that offers to trade assets in CFD types. 

We have a wide range of assets to choose from and cover 6 categories:

  1. Stocks
  2. Commodities
  3. Currencies
  4. Cryptocurrencies
  5. Indices
  6. ETFs

 

What are the different types of assets?

1. Stocks

Stocks, also known as shares, are securities issued by a company that have been listed on a stock exchange. They allow investors to buy and sell ownership of the company. The main reason for companies to list their securities on a stock exchange is to raise additional capital to develop their organization and expand it in a better direction.

 

In general, stocks are traded on stock exchanges in the country where the company is incorporated. For example, the stock exchanges in the United States include the New York Stock Exchange (NYSE), and the Nasdaq stock exchange (Nasdaq).

 

 

2. Commodities

Commodities are goods in which raw materials or primary products are traded. It is the main commodity asset that humans use in their daily lives. It is used up and gone. Currently, trading in this commodity asset is very popular in the Future Trade Market and CFDs Market.

 

Commodities can be divided into 2 main types:

2.1 Hard commodities: These are products that are derived from natural resources, such as oil and gold.

 

2.2 Soft commodities: These are products that are derived from agriculture or livestock, such as corn, wheat, sugar, and meat.

 

 

3. Currencies

Trading of currencies or trading of Foreign Exchange is the biggest market, and trading all 24 hours a day for 5 days/week.

 

The main reason why investors like to trade currencies is because these foreign currencies are constantly referenced against each other and has infiltrated into every activity of people all over the world, such as;

  • Through domestic and world political economy.
  • Through national monetary and interest rate policies.
  • Through disasters, epidemics, and wars.

 

The 7 major currencies that are most popular among investors are:

EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, and NZD/USD  

 

 

4. Cryptocurrencies

Digital currency is a digital asset that must have a login code, also known as “a blockchain.” Digital currency is stored in this blockchain system, which acts like a wallet. This cryptocurrency is a virtual currency that can be used similarly to currency. 

 

Currently, digital currencies are used as a medium of exchange instead of cash, such as for providing services or exchanging goods.

 

Types of digital currencies can be divided into 2 types as follows:

4.1. The coin is similar to a coin of general currency, but only in digital form on the blockchain system. Coin price fluctuations depend on the demand and supply of the coin, for example, Bitcoin.

 

4.2. The token is created on the blockchain system by writing a Smart Contract. It does not have a network and is used for different functions. As a result, a DeFi market was born, such as Ethereum, etc.

 

 

5. Indices

An index is a financial tool used to track the price performance of a group of stocks in that asset, such as an industry group, food group, etc., which work will be linked to the stock market index.

 

Index trading can be traded based on the movement of stock prices. Investors' capitals are distributed to companies in the index group and receive returns from stock price movements in companies in that index group.

 

Investing in this way can diversify risk more than buying individual stocks, which have less price control than other markets.

 

For example, ASX200 is a group of 200 Australian companies, and DJI 30 is Dow Jones Industrial Average 30 companies, etc.

  • The front letters indicate the industrial group in that country.
  • And the numbers at the end indicate the number of companies in that index group.

 

 

6. ETFs

Exchange-traded funds (ETFs) are mutual funds that combine with stocks and are registered on the stock exchange. Therefore, they resemble common stocks and can be traded on the stock exchange.

 

One distinctive feature of ETFs is their real-time pricing. Investments are diversified as investors' funds are spread across all securities within that specific ETF. Additionally, there are managers responsible for overseeing the investment, known as Market Makers, who cater to investors' preferences.

 

Types of mutual funds can be divided into 5 main types:

  • Equity ETFs or Index ETFs are index funds that refer to domestic stock price indices.
  • Sector ETFs are funds that refer to industry stock price indices.
  • Foreign ETFs are funds that refer to foreign stock price indices.
  • Commodities ETFs are funds that refer to commodity price indices.
  • Bond ETFs are funds that refer to the bond price index.
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