Investment Vehicle Attributes
by Charles Rotblut, CFA
Applying portfolio concepts to the actual selection of investments requires not only understanding the characteristics of each asset class, but also the vehicles that comprise the actual investment. In this month’s column, I discuss the characteristics of five types of investment vehicles you may consider using: individual securities, mutual funds, exchange-traded funds (ETFs), closed-end funds and annuities.
To be clear, an asset class and an investment vehicle are not the same thing. An asset class is a broad category of investments and securities with similar characteristics. An investment vehicle is a means for investing in a particular asset class. For example, an ETF can enable you to invest in bonds.
In this article
- Individual Securities
- Mutual Funds
- Exchange-Traded Funds (ETFs)
- Closed-End Funds
- Annuities
- How Do You Choose?
- Beginning Investor Series
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Individual Securities
The most direct way to invest in a company is to buy a security issued by it. This can be a common stock, preferred stock or a bond. Purchasing individual securities provides the most control over what is held in your portfolio. (Common stock also provides the most direct exposure to any upside, and downside, experienced by a particular company.)
Securities are most commonly purchased through a broker, who facilitates a trade through an exchange, such as the New York and NASDAQ Stock Exchanges. Expenses, including brokerage commissions, are incurred when ownership changes.
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