We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Are the Different Types of Financial Products?

Helen Akers
By
Updated: May 16, 2024
Views: 51,874
Share

Financial products are classified into three main categories depending upon their inherent function from the investor's perspective. As a result of investing in one of the available types of financial products, an investor either becomes an owner, a creditor, or gains the right to purchase or sell a product. Some of the more popular financial products include shares, bonds, investment funds, warrants and options.

Shares, which are usually thought of as stock, represent ownership in a company. They are typically offered on public trading markets in exchange for a certain monetary value. Investors pay the specified price for an amount of shares in hopes that the value will increase over time. The company selling the shares receives the funds it needs to keep its operations afloat. Shares can also earn dividend income, which represents a portion of the issuing company's profits that are returned to its shareholders.

Bonds are financial products that represent a debt that the issuing company owes to its investors. Unlike shares, the investor does not have an ownership claim. This type of investment typically has a lower yield or return than shares do, but it also carries less risk. Investors exchange cash which is paid back by the company at a certain future date, along with interest.

If an investor wishes to liquidate his bonds prior to the date that they are scheduled to mature, he may sell them back. The value of the bond will most likely not have reached its face value, which represents the amount that is scheduled to be paid back at maturity. The investor will receive the market value of the bond, which may be less or more than he originally paid for it. Private companies and the government both sell bonds to the general public.

Investment funds are financial products that may consist of money market, equity or bond funds. They do not usually invest in one particular company or source. These funds use pooled sources of cash to purchase a variety of stocks, bonds or very low-risk investments in order to diversify and reduce risk. Depending upon an investor's financial goals, investment funds might range from high risk international shares to stable bonds with a low rate of return similar to a savings account.

Warrants and options both consist of the option to buy and the option to sell a financial product. The investor does not acquire ownership or creditor status. Options are the privilege to buy or sell stock at a certain price, whereas warrants are the privilege to buy or sell bonds. The premise behind these types of investments is referred to as hedging, which is the hope that the market value of the stock or bond will change in the way the investor predicts.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Helen Akers
By Helen Akers
Helen Akers, a talented writer with a passion for making a difference, brings a unique perspective to her work. With a background in creative writing, she crafts compelling stories and content to inspire and challenge readers, showcasing her commitment to qualitative impact and service to others.
Discussion Comments
By Melonlity — On Mar 04, 2014

There is a ridiculously large number of financial products available. Most of those are offered by reputable companies, but there are a few products that are simply too good to be true. One should research carefully before investing in unfamiliar products.

Helen Akers
Helen Akers
Helen Akers, a talented writer with a passion for making a difference, brings a unique perspective to her work. With a...
Learn more
Share
https://www.smartcapitalmind.com/what-are-the-different-types-of-financial-products.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.