Most people at a certain point of their life will find themselves in the following situations: with their mortgage payed off trying to save for retirement, attempting to make the right decision for their kids retirement, or  with the options to pick assets for their company retirement portfolio. This is where financial acumen can be used to make a suitable choice for a specific individual in a specific situation.

The information on the right provides a brief summary of different investments that are commonly presented to a retail investor in the above discussed situations.

Fixed Income

Investments that yield a steady but usually low return and carry limited risk. These investments include but are not limited to: Government Bonds, Municipal Bonds, Corporate Bonds, and ASBs (asset backed securities). By purchasing a bond (debt), the bondholder collects  a fixed interest (the coupon) and in the event of a bankruptcy of the bond issuer, the bond holder stands a good chance of receiving at least some of the investment capital.  The the coupon rate however is fairly low due to the lower risk associated with this type of investment.

Equities

Two types of shares exist: preferred and common shares. The difference  between the two has to do with voting rights and  rights in the event of bankruptcy. The stock of a corporation constitutes the equity stake of its owner. Stocks can be purchased via a broker or a self directed brokerage online. As a stock holder, the shareholder ( stock purchaser)  takes on more risk compared to a bond holder, however the returns tend to be higher compared with the return from bonds.

Mutual Funds

A collective investment by pooling the money of a number of investors to purchase securities. These securities could include however are not limited to f the above discussed fixed income and equity investments. Mutual funds are classified by the investments they hold. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds

Index Funds

Is in essence a mutual fund that is designed to track a specific index such as the S&P 500. An index fund typically has lower management fees compared to mutual funds.