Basic Types of Investments - Cash, Debt and Equity
Cash is simply money that you have immediate access to through a bank account or other short-term, interest-bearing account like a T-bill. Because of its excellent liquidity, all investors should have a portion of their money in cash instruments, and in this day and age, most already do.
Debt instruments are the second type of investment. These involve loaning your money to the government or a financial institution for a set period of time at a fixed interest rate. Debt instruments include things like Canada Savings Bonds and Term Deposits (GICs) and usually take two to twelve years to mature, but you can take your money out earlier without any major penalty. These are low-risk investments, but offer a higher return than cash instruments.
The potential to generate the greatest return for your money lies in equity investments. Most people know this as the stock market, but equity investments also include many lesser-known instruments. There are no time restrictions on how long you must invest your money. There are also no guaranteed returns. But if you know what you're doing, or work with someone who does, the potential for long-term growth is much better than from either cash or debt instruments.