# Investment Product: Definition and Examples

## What is an Investment Product?

An investment product is a product offered to investors based on an underlying security or group of securities that is purchased with the expectation of earning a favorable return. Investment products are based on a wide range of underlying securities and encompass a broad range of investment objectives.

### Key Takeaways

*   Investment product is the umbrella term for all the types of investments individual and institutional investors can access in the market.
*   There are many, many investment products on the market and more are being created and customized for clients everyday.
*   Investment products generally focus on some mix of capital appreciation and income generation.
*   An investor's risk tolerance, market experience and knowledge helps to narrow down the types of investment products that should be considered.

## Understanding Investment Products

Investment product is the umbrella term for all the stocks, bonds, options, derivatives and other financial instruments that people put money into in hopes of earning profits. The types of investment products available for individual and [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) can differ significantly, but the basic profit motive is behind all of them. A wide range of investment products exist within the investment universe to help investors meet short-term and long-term investment goals. Overall, investors purchase investment products for their capital appreciation potential and income-paying distributions.

Capital appreciation and income distribution are two standard classifications for investment products. Some investment products are purchased by an investor primarily for their potential to increase or appreciate in value over time, given specified growth factors. Other investment products may have an additional income-paying component.

[Fixed income](https://www.investopedia.com/terms/f/fixedincome.asp) investments such as bonds and commingled bond funds offer investors the opportunity to purchase an asset that may increase in value while also paying out fixed interest payments or capital distributions. Other income-paying investment products include dividend-paying equities, [real estate investment trusts](https://www.investopedia.com/terms/r/reit.asp), and [master limited partnerships](https://www.investopedia.com/terms/m/mlp.asp). Modern portfolio theory suggests that an investor has a diversified portfolio of investments, including a variety of investment products, to obtain an optimal risk-return reward for their investments.

## Investment Product Examples

Within the investment market, investment products can be structured in various ways. Thus, investors have a wide variety of options in addition to buying an investment product focused on the movement of a single security. Structured investment products can include mutual funds, exchange traded funds, money market funds, annuities and more. In the U.S. and globally, investment products are highly regulated requiring substantial documentation to provide investors with a detailed understanding of investment products for which they may choose to invest.

Below are some basic examples of investment products offered in the investment universe.

**Stocks**  
Stock investments represent equity ownership in a publicly traded company. Companies issue stock as part of a capital raising regime which funds the operations of the company. Stock investments have varying growth prospects and are typically analyzed based on characteristics such as estimated future earnings and price-to-earnings ratios. Stocks can be classified in various categories and may also offer dividends adding an income payout component to the investment.

**Bonds**  
Bonds are one of the most well known fixed income investment products. They can be offered by governments or corporations looking to raise capital. Bonds pay investors interest in the form of coupon payments and offer full principal repayment at maturity. Investors can also invest in bond funds which include a portfolio of bonds managed by a portfolio manager for various objectives. Bonds and bond funds are typically classified by a credit rating which offers insight on their capital structure and ability to make timely payments.

**Derivatives**  
Derivatives are investment products that are offered based on the movement of a specified underlying asset. Put or call options on stocks and futures based on the movement of commodities prices are a few of the market’s leading derivative investment products. There are also futures and [customized investment products](https://www.investopedia.com/terms/e/equity-linked-security.asp) that allow investors to speculate on price movements or move risk between parties. Derivatives are complex investment products, so a certain level of market knowledge and experience is required.

_Investopedia does not provide investment advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor, and might not be suitable for all investors. Investing involves risk, including the possible loss of principal._