Main types of investment: What are they and how should you choose?

Investment decisions should not be taken lightly, as types of investments vary widely and differ from one another. Some people may fear losses, but in reality, the more you understand different investment products, the better you can find methods that suit yourself—whether it’s increasing asset value or protecting against unforeseen events.

The 11 Types of Investment

Currently available types of investments include:

1. Stocks (Stocks)
2. Bonds (Bonds)
3. Mutual Funds (Mutual Funds)
4. Exchange-Traded Funds (ETFs) (Exchange-Traded Funds)
5. Certificates of Deposit (Certificates of Deposit)
6. Retirement Plans (Retirement Plans)
7. Options (Options)
8. Annuities (Annuities)
9. Derivatives (Derivatives)
10. Commodities (Commodities)
11. Hybrid Investments (Hybrid Investments)

Stocks: Roles and Profit Strategies

###Meaning and Characteristics

Investing in stocks means purchasing a share of ownership in a listed company. This instrument has the potential for high returns, but also comes with higher risks. However, choosing financially stable companies with clear business models can lead to more consistent experiences.

Profits come from two sources: dividends from the company’s profits and capital gains from buying and selling stocks.

###Two Types of Stock Trading Strategies

Type 1: Technical Analysis (Technical Analysis)

This investor studies chart patterns and market signals to determine buy or sell timing. Profits come from price differences.

Example: Buying Tesla (TSLA) at $200 at an optimal entry point for 100 shares (cost $20,000). When the price rises to $270, profit per share is $70, totaling $7,000.

Type 2: Fundamental Analysis (Fundamental Analysis)

This approach views stocks as representations of company profits. If profits grow significantly, stock prices tend to follow in the long term. Investors analyze company news, earnings reports, and financial ratios.

###Beginner Steps

• Study fundamentals: Read articles and websites about stock markets, technical analysis, and regulations.
• Create a plan: Decide which companies to invest in and for how long.
• Choose a broker: Find a securities firm with reasonable fees.
• Analyze stocks: Use analysis methods suitable for your style.

Bonds: Fixed Income and Risk Management

###Role of Bonds

Bonds are debt securities issued by governments, companies, or organizations to raise long-term funds. Bondholders are creditors and receive fixed interest rates as specified.

###Sources of Returns

1. Coupon Rate (Coupon): Regular interest payments at agreed rates.
2. Capital Gains: Selling bonds at a higher price than purchase price.

Example: Investing 1,000 THB in a bond paying 5% interest over 3 years yields annual interest of 50 THB and principal repayment at maturity.

###Beginner Tips

• Study different types: long-term, short-term, government, corporate bonds.
• Understand structure: interest rate, duration, payment methods.
• Choose based on goals: low-risk assets with low interest, high-risk assets with higher yields.

Mutual Funds: Diversification with Small Capital

###Advantages of Mutual Funds

Mutual funds pool money from many investors, managed by a fund management company. The benefit is that even small amounts can be invested, offering higher returns than bank savings, with diverse policies.

###Ways to Earn from Mutual Funds

1. Use as an alternative savings account.
2. Receive returns from various investment policies.
3. Select funds designed for steady income.
4. Benefit from tax advantages via SSF or RMF funds.

###Investment Steps

• Understand fund types: equity, debt, mixed.
• Choose according to your goals: risk level and time horizon.
• Open an account: at a bank or fund management company.
• Monitor: evaluate performance and rebalance regularly.

ETFs: Index Investment Possibilities

###Features of ETFs

ETFs or exchange-traded funds are index funds traded on stock exchanges like stocks. They offer price flexibility with real-time trading.

###Profit Generation

1. Capital gains: buy low, sell high.
2. Dividends: from companies within the index.

Example: Investing in an ETF tracking the S&P 500 can follow the US market.

###Getting Started

• Select ETFs based on your target: stocks, gold, or other assets.
• Open an account with a trusted broker.
• Buy according to current exchange rates.
• Track daily performance and adjust your portfolio as needed.

Certificates of Deposit (CDs): Safety and Fixed Income

(Features of CDs

Certificates of Deposit are special savings accounts that lock funds for a set period. Early withdrawal usually incurs penalties.

)Returns

Higher interest than regular savings accounts, but funds are locked until maturity.

###Key Features

• Clear duration: weeks, months, or years.
• Fixed returns: as specified in the contract.
• Agreement between bank and depositor.
• Regular income: monthly or semi-annual payments.

Retirement Plans: Preparing for the Future

###Meaning and Purpose

Retirement plans are financial mechanisms to prepare for leaving work and having sufficient funds for post-retirement life.

###Calculating Required Savings

Formula: Required amount = Annual expenses × Expected years of life.

Example: At age 35, planning to retire at 60, with an expected lifespan of 20 more years, monthly expenses of 30,000 THB, and an estimated post-retirement expense of 21,000 THB (70% of current). Annual expenses = 252,000 THB.

Required savings = 252,000 × 20 = 5,040,000 THB.

###Beginner Planning

• Set desired income after retirement and timeline.
• Create a budget and savings plan.
• Study suitable investment methods: stocks, bonds, ETFs, mutual funds.
• Consider diversification across channels.

Options: Decision Rights

###Meaning and Types

Options are contracts granting the right to buy or sell an asset at a set price in the future. Two types: Call (Right to Buy) and Put ###Right to Sell(.

)Income Strategies

Investors can profit in both bullish and bearish markets, depending on their position.

Example: On February 18, 2021, SET50 Index at 930 points. Mr. A expects it to rise, so he opens a Long Call ###S50H21C950( with a premium of 17.1 points )equivalent to 3,420 THB(.

)Beginner Steps

• Learn terminology: Strike Price, Expiration Date, Market Price.
• Read books, articles, online resources.
• Open an account with an options-friendly broker.
• Practice with simple strategies.

Annuities: Continuous Cash Flow

###Meaning and Application

Annuities are periodic payments of equal amounts, used for mortgage payments, car loans, or monthly savings.

(Future Value Calculation

Knowing the periodic payment amount and desired total in the future.

Example: Saving 30,000 THB annually for education, expecting 3% annual return over 17 years with compound interest.

)Starting Steps

• Understand types: Fixed, Variable, Indexed.
• Study impacts on investment and retirement.
• Choose based on goals and risk tolerance.

Derivatives: Forward Contracts

(Features and Usage

Derivatives are contracts giving rights to buy or sell underlying assets, traded via futures markets )TFEX###. Buyers and sellers agree on price, quantity, and delivery date in advance.

(Profit Strategies

Profits can be made in both bullish and bearish markets, depending on whether you hold a Call )upward### or Put ###downward### position.

(Beginner Tips

• Learn terminology: Options, Futures, Swaps.
• Study each type: Covered Call, Protective Put.
• Understand risks, especially in futures markets.

Commodities: Natural Resources

)Types and Investment

Commodities include energy, metals, and agriculture, mostly traded via futures markets.

###Income Generation

Example: OPEC reduces oil production from 22 million barrels/day to 15 million, decreasing supply and increasing demand, causing WTI prices to rise from $80 to $83.

(Advantages and Disadvantages

Advantages:

• Diversification: Low correlation with stocks and bonds.
• Hedge against inflation: Benefits from rising prices.

Disadvantages:

• High volatility: Twice that of stocks, four times that of bonds.

Hybrid Investments: Balance and Diversification

)Definition

Investing across multiple asset classes to reduce risk and generate income, including stocks, bonds, real estate, and converting funds.

###Income Strategies

Select multiple asset types and control the portfolio to match goals and risk appetite.

(Beginner Planning

• Set goals: Short, medium, or long-term.
• Assess risks: Choose assets with varying risk levels.
• Continuous review: Regularly monitor and adjust plans.

Things to Know Before Investing

)Basic Steps

🔸 Define Objectives: Daily, monthly profits, retirement savings, or risk protection.

🔸 Understand Risks: Can you bear responsibility?

🔸 Calculate Income: Expected returns.

🔸 Understand Expenses: Trading fees, service charges.

🔸 Learn and Study: Read books, articles, follow news.

🔸 Manage Risks: Have a plan for high-risk investments.

🔸 Set Timeframes: Short, medium, or long-term.

🔸 Regular Checks: Track results and make adjustments when necessary.

🔸 Consult Experts: When in doubt or needing further advice.

Summary

All types of investments initially stem from individual needs and the inherent risk profiles. Investors should study and understand the characteristics and price behaviors of each product to properly assess opportunities and risks. As expertise and experience grow, they can plan more effectively and diversify their investments to manage risks better.