Investment Pyramid – “Safer” to “Riskier”
Definition of Investment
An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.
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Aggressive investors invest in stock markets and business ventures. This type of investment can involve the act of investing in a real estate, renovating it and renting it out. Aggressive investment involves a greater amount of risk.
The value of the business assets is determined after which they are used to generate revenue. Business assets can be physical, financial or intangible. Physical assets include property and machinery that is in possession of the business. Financial assets include the liquid assets of a business and the company stocks and bonds.
Conservative investors invest in cash. They put their money in investment accounts like savings, mutual funds and certificates of deposit.
In context of economics, investment is the per unit time production of goods, which are not consumed and are rather used for production in future. Tangibles like property, as also the intangibles such as the costs incurred in on-the-job trainings are included in this type of investment. Income and interest rates form the determinants of an investment decision. A growth in income boosts investments while a rise in the rates of interest is not conducive to greater investments as it makes borrowing money costlier.
Investments in finance refer to the cost of capital invested in buying financial assets and securities. They include the investments made in shares, bonds and equities. Investments in the finance sector are made through banks, insurance companies and other investment schemes. Learn all about the different types of insurance.
Foreign Direct Investment
When a company from one country invests in another country, it is known as foreign direct investment. This investment is generally of the physical form with intent to build a factory in another country.
Investing in Gold
Investments in gold can be done through ownership or by means of certificates and shares. Here is the list of the types of investing in gold.
- Bar: Buying gold bars in one of the very traditional ways of investing in gold. It is practiced in Argentina, Austria and Switzerland where gold bars can be purchased from the major banks of these nations.
- Coins: Coins, which are priced according to their weight, are purchased in this form of investment in gold. The British gold sovereign and the Swiss Vreneli are some examples of bullion coins.
- Accounts: Swiss banks provide the customers with gold accounts, which can deal in gold transactions.
- Gold Exchange-traded Funds: In this scheme of investing in gold, gold can be traded on major stock exchanges.
- Spread Betting: Firms in the UK offer spread betting in gold investments. Spread betting is about predicting the rise or fall in the prices of gold before investing in it.
- Investing with the Mining Companies: Trading in the shares of gold mining companies is one of the means of investing in gold.
Investing in Silver
Investing in silver is similar to investing in gold. The various ways in which one can invest in silver are also same as those for gold investments.
Land investment can turn out being a long-term and rewarding investment if the purchased land is developed properly.
The investments made in cash and bonds and those which involve low or moderate amounts of risk, are known as moderate investments.
Personal finance includes the money that is put aside on a regular basis with an aim of saving it. Mere saving of money involves only the risk arising out of devaluation of the saved amount due to inflation. However, saving money and investing it involves the investment risks like capital loss. Learn more about personal finance planning.
The investments made in collectible postage stamps with intent of making profits are known as philatelic investments. Rare stamps can serve as unique pieces of art and excellent collectibles. The investors dealing in stamps have chances of benefiting from the nation’s growing wealth. Know more about philatelic investment.
Investment in real estate is the one made in purchasing property. Property is purchased with intent of holding or leasing. Residential real estate investment involves the process of buying other people’s houses while the investment in commercial real estate involves the purchase of a large property that can be rented to a company. Commercial real estate investment is riskier than that in residential real estate.
Socially Responsible Investing
This investment strategy aims at fetching financial gains for a social cause. Investors prefer investing in practices that promote human rights, equality, environmental awareness and other social concerns.
There is a rising interest among the masses for investing in stock markets. Stock investments can prove to be rewarding if share trading is done wisely.
It involves buying securities whose shares seem under-priced.
Investment is after all the means to channelize money in order to secure one’s future. I am sure you would want to consult an efficient investment adviser for a quick guidance on investments.