Before getting into the question – how to invest money? Investors have to be aware of the different investment options available to them. Not every investment option is the best investment. I have covered bank products, bonds and stocks in the first part of the article – what is an investment? What are different types of investment? Today, I am going to give you a brief idea of some other types of investment including annuity, investment funds, saving for college and retirement.

Some More Types of Investment


Just like in all other types of investment, an investor and a company enter into a contract. However, the company, in this case, is an insurance company. The insurance company contractually agrees to periodically pay an agreed amount of money to the investor. The insurance company might start paying immediately or the investor might start receiving payments at some time in future. It depends on the terms both parties agree on while signing the contract.

Some investors prefer buying an annuity by paying all at once. However, the investor can also make periodic payments also known as premiums.

An investor can buy an annuity for retirement. Or, the investor can invest in an annuity for creating a retirement income stream. When an investor buys an annuity for savings and gets returns in future then it is a deferred annuity. And, when an investor invests in an annuity for creating a retirement income stream and starts receiving payments right away, it is an immediate annuity.

There are following two types on annuity:

  • Fixed annuities
  • Variable annuities

There is a hybrid annuity known as an indexed annuity. Fixed-index annuity and equity-indexed annuity are other names of the indexed annuity.

Smart investors say that annuity is a smart investment for retirement. Insurance companies often market annuities as tax-deferred savings products. You have to incur some expenses like mortality and expense risk charges, surrender charges and administrative fees. Annuities commissions often reaches 7% or more.

Investment Funds

The investment fund is a little different from some other types of investment. There are numerous investors collectively investing according to some strategy. They raise a pool of capital through investment funds and a fund manager uses these funds for purchasing some security/securities. The ownership and control of an investor’s share remain with the investor. Investment funds consist of different types of funds with each having different features. An investor receives the benefits of lower investment fees and greater management expertise.

Individual investors do not take part in the decision-making process when it comes to selecting an asset to invest in. Based on their goals, individual investors consider fees, risks and other factors. The fund manager takes care of funds and decides securities to be held. The fund manager decides the quantities of securities and time to buy and sell these securities. Exchange traded funds, mutual funds, unit investment funds and closed-end funds are publicly offered funds.

These publicly offered funds must be registered with SEC (Securities and Exchange Commissions) as investment companies. Private investment funds also known as hedge funds are not required to get registered with the Securities and Exchange Commission. So, hedge funds do not follow regulations set by SEC. Just like any other security, investment funds are not immune to risk. Past performance does not indicate how a fund will perform in future. There are open-end funds and closed-end funds.


Most of the investment funds are open-end funds. An open-end fund can issue unrestricted amount of shares. This allows investors to add more money to the pool. Open-end funds are priced when the trading day ends.


These are managed investment funds and a fixed number of shares are issued. You can trade closed-funds on an exchange. The trade of funds depends on investor supply and demand.

Exchange-Traded funds

These funds are also traded on an exchange. However, the price of exchange-traded funds fluctuates throughout the trading day. An investor can buy or sell his share throughout the trading day.

Saving for college

Funding for college education starts with savings. According to 2016-2017 College Board reports, a student needs an average $24,610 for four years full-time undergraduate at a public college. The average budget at a non-profit private college is $49,320. Tuition fees, books, room, supplies and there are some other expenses amounting to these figures. One can take advantage of smart ways offering tax advantage on saving for college. Some of these are:

  • Education Savings Account
  • 529 College Savings Plans
  • 529 Prepaid Tuition Plans
  • College Savings with Savings Bonds
  • UTMA or UGMA


Saving and managing income for retirement is an important part of personal financial planning. 401(K) or IRA offers tax-advantage on savings for retirement. A retiree can live a comfortable life or run out of money after retirement, it all depends on the way a retiree manages retirement income.

  • 401(Investing)
  • Individual Retirement Accounts
  • Smart Automatic Retirement Plan Investing
  • Target-Date Funds


Being financial derivatives, the value of options is determined based on the value of some other asset. Buying an options contract gives an investor the right to trade an underlying asset on or before a certain date at a specific price. However, it does not bind the investor by any obligation to buy or sell the underlying security/asset.

Impressed by ongoing developments in a neighborhood, John wants to get the right to invest in a residential property in that neighborhood. However, John doesn’t want to exercise his right to purchase the property right now. John’s decision of exercising or not exercising this right depends on certain developments in the neighborhood. Are they going to develop a community hall in that area? Or, maybe they will build a public bathroom near the property. Or, maybe there will be a landfill just 200 meters away from the property. So, whether John will exercise his right or not, it depends on the circumstances. Now the question is why the developer will grant this right to John? John will make down payments. Just like all other types of investments, there are risks in options as well.


Not all these types of investment are ideal for an investor. An investment is the best investment for an investor if it meets the needs of the investor. All types of investment come with some risk. So, an investor should learn about different investment options, look into the risks, look for benefits like tax advantage and consider some other aspects before making an investment.

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