Types of Investment Instruments

Types-of-Investment-InstrumentsWe recommend using a varied approach to investing so that if something goes wrong with one product, you don’t lose all of your money. The three major types of investments products which the TTSEC regulates and which you can consider are:

  • Equities (stocks/shares)
  • Bonds
  • Mutual funds

Here is a simplified explanation of these investment products:

Stocks/Shares

Ownership of a corporation represented by shares. Shareholders are entitled to a proportionate share in the corporation’s assets and profits

Bonds

  • A debt instrument issued by a private corporation or government agency to raise money for various long term projects
  • The investor is “lending” money to a company or a government
  • There is a periodic interest payment which is normally stated “up front”
  • The “loan” is paid in full at maturity

Mutual Funds

A mutual fund is a professionally managed collective investment scheme that pools money from many investors to purchase a diverse mix of securities. Each investor owns shares or units, which represent a portion of the holdings of the fund. The types of securities that a particular fund invests in are identified for the benefit of investors in the fund’s prospectus, which is a legal document, required by and filed with the Trinidad and Tobago Securities and Exchange Commission.

Advantages:

  • Simplicity – A minimum investment enables a small investor to get a full-time investment manager to make and monitor investments
  • Diversification – An investor obtains a broader range of investments than he could purchase individually.
  • Liquidity – The investor can request that his shares be converted into cash as per the rules of the fund.