Can you name some different types of financial instruments that can be used to accumulate wealth?

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pohnpei397 eNotes educator| Certified Educator

A financial instrument is any sort of a document that, in some way, has monetary value.  This can be a real, physical document or it can be a virtual document that exists only on computers.  The document can have direct monetary value.  Alternately, it can be a document that creates a legal obligation between two parties that involves money.  There are a large number of kinds of documents that meet these definitions.

Cash is a form of financial instrument.  So are checks.  Certificates of deposit are financial instruments.  Some of the most important instruments for accumulating wealth are bonds and shares of companies (stocks).  These financial instruments are owned by large numbers of investors.  On a level that is beyond that of most individual investors, things like options and futures contracts are also financial instruments.  The mortgage-backed securities that helped lead to the financial crisis of 2008 are also financial instruments.

In other words, there are many kinds of financial instruments that people use to accumulate wealth.