A strategy is what you do. A security is what you buy. Types of Investing Strategies sorts investors by where their return is supposed to come from; this page sorts the things they buy. It matters because the same idea can be held in very different wrappers — a bond or a bond fund, one stock or a few thousand, a fund you can sell any afternoon or one that lets you out a few percent at a time — and the wrapper decides what you can count on.
On This Page
- What a Security Is
- The Main Buckets
- Owning a Bond vs. Owning a Bond Fund
- Owning a Stock vs. Owning a Stock Fund
- Funds Come in Different Wrappers
- Derivatives: Contracts on Something Else
- Private Funds and Who Is Allowed In
- The Retail Doorway, and Its Price
- Which Securities Fit Which Game
- References & Resources
What a Security Is
A security is a financial claim you can buy and sell. Almost every one takes one of four shapes:
- Ownership. A share of stock is a share of a company. You are paid from what the business earns, and you are last in line if it fails.[1]
- A loan. A bond is a loan to a government or a company. The borrower has promised to pay you interest and return your money on a set date, and the risk is that it cannot pay its debt.[2]
- A share of a pool. A fund owns a basket of other securities, and you own a slice of the basket, run by a manager under rules written in the fund’s prospectus.
- A contract on something else. A derivative, such as an option or a futures contract, takes its value from the price of another asset, and it usually expires.
Some things people invest in are not securities at all. Money in a savings account or a certificate of deposit is a bank deposit, protected by federal deposit insurance rather than by securities law.[3] A house, a gold bar or a baseball card owned outright is property. Futures and prediction-market contracts are overseen by the Commodity Futures Trading Commission rather than the SEC.[4] The labels matter less than the question underneath them: what exactly do I own, and what has to happen for it to pay me?
The Main Buckets
The buckets below run roughly from the most predictable to the least. The column most people skip is the fourth one.
| Bucket | What you own | Return comes from | Can you sell it any business day? | Main risk |
|---|---|---|---|---|
| Cash and cash equivalents — savings, CDs, money market funds, Treasury bills | A deposit, or a very short loan | Interest | Usually. CDs charge a penalty for withdrawing early. | Inflation |
| Bonds — Treasury, municipal, corporate | A loan to a government or company | Interest, plus face value back at maturity | Yes, through a broker, though the price moves with interest rates | Default, rising rates, inflation |
| Stocks — common and preferred | Part ownership of a company | Dividends and growth in the business | Yes, on an exchange | Business failure; volatility |
| Funds — mutual funds, ETFs, index funds | A slice of a basket of securities | Whatever the basket earns, minus fees | Yes | The risks of what is inside, plus fees |
| Real estate investment trusts (REITs) | Shares of a company that owns or finances property | Rent and property values | Publicly traded REITs, yes. Non-traded REITs, often not.[5] | Property cycles; for non-traded REITs, illiquidity |
| Derivatives — options, futures | A contract tied to another asset’s price | Movement in that price | Yes, until it expires | Leverage, time decay, losses larger than expected |
| Private funds — hedge, private equity, venture capital | An interest in an unregistered fund | Manager skill, control of companies, and a premium for locking money up | Rarely. Often four times a year at most, after a lockup.[6] | Illiquidity, fees, limited disclosure |
Owning a Bond vs. Owning a Bond Fund
This is the distinction most people are never told, and it changes what a bond can do for you.
An individual bond has a maturity date. On that date the borrower pays the final interest payment and the bond’s face value, called par.[2] If you hold it to maturity and the borrower does not default, interest-rate swings along the way have little or no direct effect on what you receive.[7] That is why a bond, or a ladder of bonds maturing in different years, can be matched to an obligation you have with a date on it, like tuition.
Buying a bond to match an obligation has two benefits. First, it usually pays a better rate than an ordinary savings account on money you will not touch until a set date, although some high-yield savings and money market accounts come close. Second, it adds a little friction. You can sell a bond before it matures, but it takes a trip to a brokerage account and the price may be lower than you paid — enough to make you stop and weigh the cost, where a savings account is one tap away from being spent.
A bond fund is a mutual fund or ETF that holds many bonds.[2] It spreads the risk of any one borrower defaulting, but the fund itself never matures. The manager keeps selling bonds as they age and buying new ones, so the fund’s value moves with interest rates for as long as you own it.[8] There is no date on which you are promised your money back, and the fund charges ongoing fees that a bond you already own does not.
The price of a bond fund rises and falls with the value of the bonds inside it, and what is inside matters. A fund of long-term bonds moves much more when interest rates change than a fund of short-term bonds.[8] Credit quality matters too: a fund of lower-rated, high-yield (“junk”) bonds also rises and falls with the economy and the risk of defaults, while a fund of AAA-rated bonds moves mostly with interest rates.
A rougher version of the hold-to-maturity principle still applies. A bond fund pays out interest along the way, usually every month, and when rates rise it replaces maturing bonds with new ones paying the higher rate, so its income goes up. If you reinvest that income, you buy more shares while the price is down. The longer you hold, the more of a rate-driven price drop the higher income can make up. That is a tendency, not a promise: unlike a bond, the fund never hands your principal back on a set date.
| Individual bond | Bond fund or bond ETF | |
|---|---|---|
| Maturity | A fixed date | None — the holdings are continually replaced |
| Getting your principal back | Face value at maturity, if the borrower pays | Whatever the shares are worth on the day you sell, plus the interest paid along the way; no date guarantees it |
| When rates rise | The price falls, but that matters little if you hold to maturity | The value falls and there is no maturity date to wait for, though the fund starts buying new bonds at the higher rate, so its income rises |
| Diversification | One borrower | Many borrowers |
| Ongoing fees | None after purchase | An expense ratio every year |
| Best fit | A known bill on a known date | A long-term allocation you rebalance |
Neither is better. They are built for different jobs inside the preserve-and-fund family: the bond for liability matching, the fund for a diversified allocation.
Owning a Stock vs. Owning a Stock Fund
A single stock is a claim on one business, and its fortunes are that company’s fortunes. Research covering every U.S. stock since 1926 found that most individual stocks did worse over their lifetimes than one-month Treasury bills, while a small minority produced all of the market’s net gains.[9] That is the standard case for owning a stock fund.
A fund is a basket of many securities — stocks, bonds or both — bought with one purchase. The kinds of fund are compared in the next section, and within each kind there are funds tracking almost every corner of the market you could imagine. The general rule on this site is to put long-term money into broad, whole-market funds, but it is your money and your plan. The best place to see what is available is the brokerage or retirement-plan provider where you already have an account. If this is all new to you, the large brokerages publish free fund research and screening tools — some need an account — such as Fidelity’s[10] and Schwab’s.[11]
An index fund tracks a market index such as the S&P 500, so you own the few big winners automatically, and it often costs less than a fund whose manager picks stocks — though not every index fund is cheap, so check the expense ratio.[12] Investment Risk covers business risk in more detail, and Building an Investment Portfolio by Age shows how a few index funds make a complete portfolio.
Funds Come in Different Wrappers
Two funds can hold the same assets and still behave very differently, because the wrapper decides how, and when, you can get out.
| Wrapper | How you sell | Price you get | What to watch |
|---|---|---|---|
| Mutual fund | Back to the fund, on any business day | Net asset value (NAV), calculated once a day[13] | Sales charges and the expense ratio |
| Exchange-traded fund (ETF) | On a stock exchange, through a broker | The market price, which may differ from NAV[14] | The expense ratio and the gap between buying and selling prices |
| Closed-end fund | On an exchange; the fund does not buy shares back | The market price, often above or below NAV[15] | Discounts that can widen; borrowing inside the fund |
| Interval fund | Back to the fund only during scheduled repurchase offers, every three, six or twelve months, for 5% to 25% of the shares[16] | NAV on the repurchase date | Requests may be only partly filled; repurchase fees of up to 2% |
| Tender-offer fund or non-traded BDC | Back to the fund through periodic tender offers, usually quarterly and capped | NAV, sometimes less an early-repurchase fee | No guarantee a tender offer happens at all |
The first two give you daily liquidity: you can turn the shares into cash on any business day. The last three give that up so the manager can hold assets that are hard to sell, like private companies and private loans. Whether that trade is worth making depends entirely on whether the money might be needed.
Derivatives: Contracts on Something Else
An option gives its buyer the right, but not the obligation, to buy or sell an asset at a fixed price within a set period.[17] A futures contract commits both sides to trade an asset at a set price on a future date.[4] Both let a small amount of money control a large position, which is why the same contract can be insurance for one person and a leveraged bet for another: a farmer who sells futures against a crop is hedging, and a trader with no crop is speculating.
Two features set derivatives apart from everything above. First, they expire, so being right too late is the same as being wrong. Second, losses can grow faster than the price moves — for some positions, past the money you originally committed. That is why your broker must approve your account for a specific level of options trading before you can trade options at all.[17] Prediction-market event contracts are derivatives too: yes-or-no contracts that pay a fixed amount if an event happens.[18] Types of Investing Strategies covers where these shade into gambling.
Private Funds and Who Is Allowed In
Hedge funds, private equity funds and venture capital funds are private funds. They are not registered with the SEC as investment companies, so they are not bound by the rules that protect mutual fund investors: daily redemption at NAV, disclosure, fair pricing of shares, protection against conflicts of interest, and limits on leverage.[6] In exchange, the law limits who may buy. The SEC’s reasoning is that investors in unregistered offerings should be financially sophisticated and able to fend for themselves or sustain the risk of loss.[19]
There are two tests. Meeting any one of the accredited-investor criteria is enough; the qualified-purchaser test is a separate, higher bar.
| Test | Who qualifies | Where it applies |
|---|---|---|
| Accredited investor | Any one of: earned income over $200,000 ($300,000 with a spouse or spousal equivalent) in each of the past two years, with the same expected this year; or net worth over $1 million, alone or with a spouse or spousal equivalent, not counting your primary home; or a Series 7, 65 or 82 securities license in good standing.[19] | Most private placements, hedge funds, private equity and venture capital funds |
| Qualified purchaser | An individual who owns at least $5 million in investments (not net worth); a family-owned company with at least $5 million in investments; or anyone investing at least $25 million on a discretionary basis.[20] | Larger private funds that rely on this test to avoid registering as investment companies |
The terms explain the gate. Hedge funds typically charge an annual management fee of 1% to 2% of assets plus a performance fee of 15% to 20% of profits, usually let investors redeem four times a year or fewer, and often impose a lockup of a year or more.[6] Private equity money can be tied up for several years before any return arrives.[21]
The Retail Doorway, and Its Price
You do not have to be accredited to get some exposure to private assets. Registered funds — interval funds, tender-offer funds and non-traded business development companies (BDCs) — can hold private companies or private loans while still filing with the SEC. Two BlackRock funds show the trade clearly. They are examples, not recommendations, and both are sold through financial professionals.
| BlackRock Private Investments Fund (BPIF[22]) | BlackRock Private Credit Fund (BDEBT[23]) | |
|---|---|---|
| What it holds | Private equity | Private loans to companies |
| Structure | Registered closed-end fund operating as a tender-offer fund | Non-traded business development company |
| Who may buy | No accredited-investor certification required, subject to the investment minimum[24] | Investors meeting suitability standards: generally $70,000 of gross income and $70,000 of net worth, or $250,000 of net worth, with higher bars in some states. Minimum of $2,500 for Class S and D shares.[25] |
| Fees | Management fee of 1.50% of net assets from August 1, 2026; total net expenses of 2.77% a year for Institutional shares, including the costs of underlying funds[22] | Management fee of 1.25% of net assets, plus incentive fees of 12.5% on income and on capital gains, subject to a 5% total-return hurdle[25] |
| Getting out | Quarterly tender offers for up to 5% of the fund’s NAV, not guaranteed; a 2% fee on shares tendered within a year of purchase[24] | Quarterly repurchases of up to 5% of shares outstanding, not guaranteed; shares held less than a year are bought back at 98% of their value[25] |
Compare that with an index fund you can sell on any business day for a small fraction of a percent a year. The private-asset funds are reasonable for money with a long horizon and no job to do in the meantime, and a serious mismatch for anything you might need. Before buying any interval, tender-offer or non-traded fund, find three numbers in the prospectus: the total annual expenses, the repurchase cap, and the early-repurchase fee.
Which Securities Fit Which Game
| Strategy family | Securities that usually fit | What to watch |
|---|---|---|
| 1. Preserve and fund | Savings, CDs, Treasury bills, individual bonds or a bond ladder | Bond funds never mature, so match a dated bill with bonds that do |
| 2. Own and compound | Broad stock and bond index funds; individual stocks for quality or value investors | Expense ratios, and keeping daily liquidity |
| 3. Trade price and information | Individual stocks, ETFs, options, futures | Leverage and expiration dates |
| 4. Control, build and speculate | Private funds if you qualify; interval, tender-offer and non-traded funds; anything held for a later buyer | Repurchase caps, lockups and fees |
| 5. Optimize the household | Any of the above, in the right account | Which account holds which security |
A security never tells you which game you are playing. The same S&P 500 fund can be a thirty-year retirement holding or a six-week parking place for cash. Decide the game first, with the five questions, then choose the security, and the wrapper, that fit it.
References & Resources
- SEC Investor.gov: Stocks — Stocks as a share of ownership in a company; common versus preferred stock.
- FINRA: Bonds — What a bond is, how par value is repaid at maturity, and how bond funds differ, including their ongoing fees.
- SEC Investor.gov: Certificates of Deposit (CDs) — How CDs work and federal deposit insurance up to $250,000 per depositor at an insured bank.
- Commodity Futures Trading Commission: Basics of Futures Trading — How futures contracts work, and the difference between hedging and speculating.
- SEC Investor.gov: Real Estate Investment Trusts (REITs) — Publicly traded versus non-traded REITs, and the liquidity and valuation risks of the non-traded kind.
- SEC Investor.gov: Hedge Funds — Who may invest, the investor protections hedge funds are not subject to, typical fees, redemption limits and lockups.
- FINRA: Brush Up on Bonds — Interest Rate Changes and Duration — Why a bond held to maturity is little affected by interest-rate changes, and how duration measures the sensitivity of one that is not.
- SEC Investor.gov: Bond Funds and Income Funds — Why the market value of a bond fund’s holdings rises and falls with interest rates.
- Hendrik Bessembinder, “Do Stocks Outperform Treasury Bills?” — Arizona State University, W. P. Carey School of Business; published in the Journal of Financial Economics (2018). Covers all U.S. common stocks in the CRSP database since 1926.
- Fidelity: Stock Screeners & Fund Comparison Tools — Fidelity’s mutual fund evaluator and other fund search tools. Some features require an account.
- Charles Schwab: Find and Invest in Mutual Funds — Schwab’s Fund Finder, mutual fund screener and fund comparison tool. The screeners require a Schwab account.
- SEC Investor.gov: Index Funds — What an index fund is, why its costs are often lower, and the caution that not all index funds cost less than actively managed ones.
- SEC Investor.gov: Mutual Funds — Buying from and selling back to the fund at the next calculated NAV, on any business day.
- SEC Investor.gov: Exchange-Traded Funds (ETFs) — ETF shares trade on exchanges at market prices that may or may not equal NAV.
- SEC Investor.gov: Publicly Traded Closed-End Funds — Fixed share counts, exchange trading at a premium or discount to NAV, and the use of leverage.
- SEC Investor.gov: Interval Funds — Repurchase offers every three, six or twelve months for 5% to 25% of shares, and repurchase fees of up to 2%.
- FINRA: Options — How options work, their risks, and why a broker must approve your account for a specific level of options trading.
- CFTC: Understanding Prediction Markets and Event Contracts — What event contracts are, that the CFTC regulates them, and its guidance to trade only with risk capital.
- SEC Investor Bulletin: Accredited Investors — Updated April 14, 2021. The income, net-worth and professional-license tests, any one of which qualifies, and why private offerings are limited to accredited investors.
- Investment Company Act of 1940, section 2(a)(51): “qualified purchaser” — 15 U.S.C. 80a-2(a)(51), via Cornell Law School’s Legal Information Institute. The $5 million and $25 million investment thresholds.
- SEC Investor.gov: Private Equity Funds — Who may invest (typically accredited investors and qualified clients), illiquidity and fees.
- BlackRock Private Investments Fund (BPIF) — BlackRock’s product page for financial professionals: fund structure, the 1.50% management fee effective August 1, 2026, and net expense ratios by share class. Figures as published in 2026; check the current prospectus.
- BlackRock Private Credit Fund (BDEBT) — BlackRock’s product page for financial professionals: a non-traded BDC targeting current income, with quarterly repurchases of up to 5% of shares.
- BlackRock: BPIF Investor Guide — No accredited-investor certification required; expected quarterly tender offers for up to 5% of NAV, not guaranteed; 2% early repurchase fee within one year.
- BlackRock Private Credit Fund: Prospectus — Filed with the SEC April 24, 2026. Suitability standards, investment minimums, management and incentive fees, and the share repurchase program.
Educational content only. The BlackRock funds are illustrations of a fund structure, not recommendations; their fees, minimums and repurchase terms come from 2026 offering documents and change. Read the current prospectus before investing in any fund.