by Lynelle Herndon

Created on: August 22, 2008   Last Updated: February 19, 2010

One great way of earning money is to invest it. In terms of personal finance an investment is considered to be property or some other asset that is purchased for future economic gain or return on capital. There are many types of investments to choose from. When considering which investment type is best for you, it is important to first think about your financial situation and monetary goals. You may be interested in short-term, long-term, or retirement savings, or simply generating an income. It is also important to remember that each type of investment comes with a risk; that is to say the return on investment (ROI), is uncertain. This article will generally discuss the different investment types, comparing risks and ROI, to help you make informed investment choices.

SECURITIES

A security is an investment instrument issued by a corporation, government, or other organization, which offers evidence of debt or equity. Typically, stocks and bonds are considered to be securities. Variable annuities are also considered to be securities, and are regulated by the Securities and Exchange Commission (SEC).

To have a stock means you have a share in a company. Essentially you have bought your right to a portion of that company's profit. When investing in stocks, a company's considerable growth is your profit; at the same time, that company's failure is your loss. Though you can invest in stocks at various levels, they all carry a great risk that depends on the particular stock market as well as overall economic conditions.

Bonds, on the other hand, are considered to be a safer security than stocks. The value of a bond may rise even as the stock market falls. According to www.investinginbonds.com, a bond is "a debt security, similar to an I.O.U. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency or other entity known as the issuer." The value of a bond is related to the score that a credit rating agency such as Standard & Poor's 500 Composite Stock Price Index, also known as the S&P 500. However, bonds are still are considered to be safer than stocks because they do come with some legal protection. That is to say that in the case of an issuer's bankruptcy there is a capital recovery amount that the investor is entitled to.

ANNUITIES

According to www.sec.gov, an annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees

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