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Investments

INVESTMENTS

Everyone wants a safe and secured financial life. It's pretty easy to understand why people invest in various financial plans and products. It is the need to increase financial freedom and security, as well as the ability to afford whatever they want in life. Today, investing is becoming more of a necessity as compared to the yesteryears, when people worked the same job for 30 years and retired to a satisfactory pension. For an average person, investing is the only way to maintain a decent lifestyle and live a financially secured life after retirement.

 

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What is Investment?

Investment is basically a commitment of capital or funds to purchase financial instruments or assets for gaining profitable returns in the form of income or interest against value of the instrument. Investments are related to savings or deferring consumption. Investments involve choice by an individual or an organization, like pension funds.

An investment is made after doing some analysis on whether to invest or lend money in instruments or assets such as a property, stock, commodity, bond, or financial derivatives. It involves a level of risk and provides a possibility of generating profitable returns over a specified period of time. For instance, if a amount of funds are invested in assets or banking, it is anticipated that certain returns will be received through the investment in the near future.

Investment from Different Perspectives?

Investment can mean savings alone, or a saving made through delayed consumption. Investments can be divided into different types according to different theories and principles.

Investment in Economic Terms

According to economic theories, an investment is defined as the per-unit production of goods that have not been used, but would be utilized for future production. An example of this form of investment includes tangible goods such as construction of a factory or bridge, as well as intangible goods such as six months of on-job training. With regards to national production and income, GDP (Gross Domestic Product) has a vital constituent, which is called gross investment.

Investment in Financial Terms

In financial terms, investment is referred to as purchasing financial assets or securities from the capital market. This also includes buying money market and real property with higher market liquidity. Examples of such investment include gold, silver, precious items and real properties. Financial investments also include bonds, stocks as well as other types of securities. Indirect financial investments done with the help of third parties or mediators include mutual funds, pension funds, insurance companies and commercial banks.

Mutual Funds

Mutual Funds Mutual funds have become extremely popular over the past decade. More and more investors are turning to mutual funds as an investment for financial security after retirement. In the U.S alone, trillions of dollars have been invested in mutual funds. As a matter of fact, a lot of people consider mutual funds to be the safest and best way of...

Alternative Investments

Cash, bonds and stocks are considered to be traditional investments as they have historically been the tree main avenues of business, before the whole array of alternative investments came into the picture. Moreover, as alternative instruments are often more complex, are relatively illiquid and have limited regulations on them, investments in them are confined to high net worth investors and...

Bond Basics

What are Bonds? A bond in financial terms is an instrument of indebtedness of a bond issuer to the holder. It is a debt security wherein an issuer owes bondholders a debt and is obligated to pay them interest and/or repay the principal amount at a later date, referred to as maturity. In simple language, a bond is a form of loan in which the bondholder is the...

Stocks

Stoc ks People's interest in the stock market has grown significantly over the last few decades. What was once considered a toy for the rich has now become an investment of choice for financial gains. This growing demand combined with the advancement in trading technology has opened up the markets, so almost everyone can own stocks....