Some of the instruments of monetary investment that a retail customer can invest in are:
- Money market funds: These are mutual funds that invest in short-term debt securities, such as treasury bills, certificates of deposit, commercial paper, etc. They offer safety, liquidity, and low returns.
- Bonds: These are debt instruments issued by governments, corporations, or other entities to raise funds. They pay a fixed or variable interest rate to the investors and return the principal amount at maturity. They vary in terms of risk, duration, and yield.
- Equity: These are shares of ownership in a company that entitle the investors to a portion of the company’s profits and assets. They offer the potential for high returns, but also carry high risk and volatility.
- Exchange-traded funds (ETFs): These are funds that track the performance of an index, a sector, a commodity, or a basket of assets. They trade on stock exchanges like stocks and offer diversification, low costs, and tax efficiency.
These are some of the common instruments of monetary investment for retail customers, but there are many others, such as derivatives, real estate, gold, etc.