Describe three of the five different types of investments available to consumers

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Describe three of the five different types of investments available to consumers and the advantages and disadvantages of each.

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Advantages: A business is the most powerful asset to own because you can benefit from tax advantages, leverage people to increase your cash flow and have control of your operations. The richest people in the world own businesses 
Disadvantage: business are “people intense” by that I mean you have to manage employees, clients and customers. People skills and leadership skills, as well as talented people who can work as a team are essential for a business to be a success. This takes the most financial intelligence to run and probably is the most prosperous of the 4 asset classes 

Real estate 
Advantages: real estate can have high returns due to using banks money for leverage via financing and other peoples money (OPM) via investors, capitalizing form tax advantages like depreciation and collection Steady Cash flow from if the asset is managed well and is the most easy to leverage 

Disadvantages: Real estate is a management intensive asset. is illiquid and if mismanaged can cost you a lot of money .after a business, real estate require the second highest level of financial intelligence. 

Paper Assets 
Advantages: paper assets have the advantage of being easy to invest in.additonaly they are very liquid. 

Disadvantage: they are very easy to Liquidate and you don’t have much control over them the majority of the time 

Hard Assets 
Advantages: commodities are a good hedge protection against inflation 
Disadvantages: you have to find a safe place to put them


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Purdue University

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