Which vehicles can I invest in? A panoramic view

An investment vehicle is any financial product or instrument in which money can be deposited in exchange for a return. Investment vehicles include everything from real estate (houses or land) to works of art and jewelry. However, in terms of financial methods, we encounter both conventional vehicles, such as bank deposits, and more innovative products, such as ETFs. While the variety is immense, the goal is the same: to put the money into a product that generates a return. 

While a vast number of investment vehicles of diverse types exist, the following are the most popular and widely used by retail investors today. Although it is possible to invest in any of these instruments, you should always consider your risk profile and seek the advice of an expert to determine the most suitable options.

Rather than investment vehicles, bank deposits can be considered savings vehicles. Nevertheless, they are an option worth considering. The investor deposits money for a pre-determined period of time with, typically, a pre-determined return.

In this type of vehicle, the investor lends his money to the bank for the purpose of receiving the full amount of that money in addition to the associated and previously fixed interest. This product is less profitable and more conservative because it is backed by Guarantee Funds, which protect the investor from losing the deposited money.

However, it must be noted that, as with all investment vehicles, profitability is associated with risk. The lower the risk, the lower the return.

Mutual funds are probably the best-known investment vehicles for investors. Mutual funds are vehicles in which money is pooled from a small and/or large group of investors to purchase financial assets. There are many types of mutual funds. Each type is recommended for specific risk profiles and financial objectives.

For example, a European fixed-income mutual fund could invest in government bonds of the different countries of the Old Continent, such as in corporate bonds issued by companies residing in this region. Meanwhile, a U.S. equity fund invests in shares on the U.S. stock market. U.S.,

Although a variant of mutual funds, index funds have gained increasing prominence in the market. In fact, U.S., together with ETFs (exchange-traded funds), they already account for 50% of the market share in the United States.

These funds replicate the performance of an index and are not managed by a group of managers. Whereas with active funds, experts decide which stocks to buy or sell, in index funds, these decisions are made passively.

To illustrate this point more clearly, an index fund would have the same return (minus fees) as its benchmark index. Therefore, if you invest in a fund that replicates the S&P 500, you would be indirectly purchasing the 500 shares of the main U.S. index.

ETFs are very similar products to index funds in terms of how they work. However, the difference is that they are more accessible and can be purchased through virtually any broker since they work in the same way as stocks. Consequently, ETFs offer much more variety than index funds.

In addition, ETFs not only replicate the performance of an index but also other assets. For instance, there are ETFs that replicate the price of gold, a basket of commodities, and even Bitcoin. Rather than physically buying an ounce of gold and selling it over the years, you can have exposure to the gold market with just one ETF, where the precious metal is held by the company issuing the investment vehicle.