What it is
An investment vehicle refers to the many options that you can invest in. They can be classified in different ways.
Going by according to how you invest in them, you’ll find that investment vehicles are either direct or indirect. The former involves acquiring and managing assets directly, and includes stocks, bonds and real estate.
With indirect investment vehicles, you won’t directly own assets. Your money is pooled along with those of other people and is used to buy assets. Simply put, the fund owns the assets and you are a part-owner of the fund.
Examples of such funds are Unit Investment Trust Funds (UITFs), mutual funds and exchange-traded funds (ETFS).
When classified according to investment characteristics, investment vehicles are grouped together according to how similar they are in their nature. The categories are ownership (like stocks), debt (including bills, notes and bonds), and cash and equivalents.
What it means for you
Investment vehicles are the products you can put money in with the hope of earning a profit over time. With all the available options that you’ll encounter while on your investing journey, understanding how each one works and following your risk profile are key to picking the ones that are right for you.
As you add more investment vehicles to your portfolio over time, remember that you should make and follow a proper asset allocation to help manage your risk even more.
