There’s More To Investing Than You May Think

 There’s More To Investing Than You May Think

Written by: Sanshray Vallecha 

As juniors and seniors in high school, it is integral to start learning how to handle and invest your money. But like me, many people think of investing or only in the stock market. On the other hand, investing is a lot more than just investing in the stock market. Although investing in the stock market is one way to invest your money, there are many more options like investing in property, in a savings account, in a CD, or into retirement plans, just to name a few. The options to invest your money are very vast, but require a lot of research to see where your money is being invested into, how your money will be used, and when you will get your money back. Learning how, where, and when to invest your money can take a lot of time and effort to figure out, but learning some ways to invest your money can reduce that time.

In reality, there are umbrella groupings of all of the ways to invest, and these groupings are not common between different sources. For example, CommSec believes that investments are grouped into four categories: growth investments, defensive investments, cash investments, and fixed interest investments. On the other hand, lifehacker believes that there are three main types of investments: ownership investments, lending investments, and cash investments. They also say that there is another miscellaneous category of investments that don’t really fit into the aforementioned categories. From what I can gather, the main types of investments are offensive investments, defensive investments, cash investments, and other investments. Out of these investments, offensive and defensive investments tend to be the most popular, and there is a lot to gather from just these two types of investments.

Firstly, there are offensive investments. These investments tend to be high-risk high-reward investments that can either last any amount of time, but usually tend to last a long amount of time. Some of these investments include: buying real estate, shares, starting your own business, cryptocurrency, and becoming a venture capitalist. These investments tend to take a couple of years to develop, but can provide large dividends in the future. Also, these investments tend to have a larger percent of interest.  On the other hand, these investments are very volatile and are susceptible to dropping due to market volatility. With buying real estate, it is usually more profitable to wait at least a couple years before selling the property, but on the other hand, it can be very hard to gather the money to be able to afford real estate, and the value of the property can easily drop. One way that people don’t have to pay as much to enter the real estate market is to invest in real estate investment trusts, or REITs. In short, REITs are a nontraditional way for people to invest in property because you pay a company a sum of money and that corporation or trust will use your money and other investors’ money to purchase income properties, and over time some of the profit that the organization makes will come back to you, but if they lose money, then so will its investors. 

With defensive investments, they are usually the opposite of offensive investments, and tend to be low-risk low-reward investments. Also, these investments tend to protect your money from different threats, like bear markets, inflation, and crisis. In the table to the right, you can see common defensive investments with their common defenses. Defensive stocks are stocks that will perform no matter how the economy is trending, and will usually withstand a bear market, where most stocks are dropping in value. These are companies like Walmart, Procter & Gamble, and Coca Cola, that are usually 

international conglomerates that are in the utility, pharmaceutical, auto repair, and alcoholic beverage industries. From the graphs to the right, you can see the decline of the S&P 500 over 2020, when compared to a defensive stock, Walmart, between Q1 of 2018 to Q1 of 2021. These graphs show that defensive stocks can withstand market volatility and how they can be low-risk investments. Another defensive investment is investing in TIPS. TIPS are Treasury Inflation-Protected Services, which are a form of bond backed by the US Treasury. Since inflation is an invisible threat to anyone’s financial profile, it is something that most people don’t think about to diversify their profile. As the name suggests, these services withstand the threat of inflation through maturity. As a TIPS investment matures, the initial money given, the principal, and the interest rates reflect the inflation rates at the time. The downside to TIPS is that if market deflation occurs, the interest rate will drop because it is based on how much the principal is worth, and if there is deflation, the principal will become less valuable.  

Although there are several other types of investments that people can venture into, offensive and defensive investments tend to be the most popular, and are what most investors gravitate toward when starting to build a financial portfolio. From these investments, we can start to think and develop on how we will build our financial portfolios now and in the future. Although many high schoolers believe that all of their take home pay should be spent on whatever they want almost immediately, we should start to invest as early as possible because investments can take a lot of time and money to develop and truly reach its full potential. 

Works Cited

“A Guide to High-Risk Investments.” SyndicateRoom, 

www.syndicateroom.com/investing/high-risk-investments.

Rowan, Kristin Wong and Lisa. “The Different Types of Investments and How They Work.” Two 

Cents, G/O Media Inc., 19 May 2020, 

twocents.lifehacker.com/the-many-different-types-of-investments-and-how-they-w-1683582510.

Sheets, Gregory. “Offensive vs. Defensive Investments.” Www.gregorydsheets.com, 

www.gregorydsheets.com/------Offensive-vs--Defensive-Investments.6.htm.

“What Are the Different Types of Investments?” CommSec, 

www.commsec.com.au/education/learn/investing-basics/what-are-the-different-types-of-

investments.html.