Other types of funds and investment activities
Common fund types and investments
Exchange Traded Funds (ETFs). This type of fund is traded on an exchange throughout the day, can resemble index funds, and may have tax advantages for some. Often you will pay brokerage commissions when you buy or sell. At the time of purchase, check to see whether preferred ETFs are available for purchase at low or no commission cost from providers. A typical ETF that is sold through a broker may be best if you are investing a large lump sum or adding money rarely, but could be a more expensive choice if you are investing smaller sums regularly, over a long period of time.
Fund of Funds. This is a mutual fund that owns other mutual funds. You get the benefit of diversity, which lowers risk, but check to see whether extra management fees make this an expensive fund to own.
Mutual Funds and Financial Services That Meet Religious Requirements. In some faiths, paying or earning interest is a forbidden practice. Some banks and investment companies offer investment products designed to meet religious requirements. Ask your local bank or investment firm whether they can assist you in this way.
Real Estate Investment Trusts (REITs). These are similar to mutual funds, but they own real estate properties or real estate related investments such as mortgages. They vary widely in risk, so check the REIT's performance history and tax effects carefully before you buy.
Check these investment plans carefully
The following plans could be valuable for some, but are not suitable for everyone. Check the terms carefully and ask questions before you buy.
Variable Annuities. Annuities can be purchased from an insurance company or other financial provider. You can choose between a lump sum payment and multiple payments (premiums). At a later fixed date, the company may start making regular payments to you. Many people who buy variable annuities do not get the main benefit of this financial product - the annuitization (payments) - because they withdraw the principal instead. Check the plan terms carefully, especially the details about when annuity payments will begin. For an older individual, it may not be worthwhile to buy a policy that will not make payments any time soon. Ask about fees, penalties for withdrawals, and whether this investment could lose value.