Many types of investments are available, ranging from those which will protect and retain capital, to the more aggressive derivative securities. Investors select investments for various reasons including income, capital growth or the favorable tax treatment for Canadian dividends and rents.

Today, investors search beyond local markets for higher returns and foreign market diversification opportunities. Diversification, plays an important role in lowering risk through the development of a portfolio which includes a number of different asset classes.

There are numerous ways to classify investments.

1) An investment can be purchased in different forms.

An investor can purchase a financial asset or a real asset. A financial asset can be defined as an investment instrument or a security, which represents capital invested into either the debt or equity of a company. Real assets represent an investment in real estate or other tangible property.

2) An investment can be either marketable or non-marketable.

A marketable investment is one for which a secondary market exists and in which assets can be purchased or sold easily.

A non-marketable investment has no secondary market.

3) An investor can invest either directly or indirectly.

An investment is direct when the investor acquires a claim on a specific security.

An indirect investment results when an investment is made in a pool of assets.

4) Investments can be classified according to their profiles.

A debt investment results when an investor becomes a creditor, receives evidence of the debt (the promise of the repayment of principal at a specified time), and the debtor contracts to pay interest in the interim.

An equity investment represents a residual ownership claim in a specific equity or property. The value of derivatives depends upon an underlying asset.

5) Investments can be classified according to their perceived level of risk.