Investment: Definition, Types, Best Guide for OPtimal Result(+ how it work)

Not like the banking industry where deposits are covered by the Federal Deposit Insurance Corporation. And the value of stocks, bonds, and other securities depends on the market conditions. Many people like you turn to the market to buy a home, send your kids to college or even raise a pension. Though investment is essential, yet no one can guarantee that you will benefit from your investment, sometime they may even lose value. This is the reason for this article, to guide you through.

Investment

Investment is the allocation of funds in anticipation of future gains. In other words, investment refers to the ownership of an asset or commodity, with the purpose of investment returns. Also, achieving some value on the asset over a period of time. Whenever you invest, you should always sacrifice some of your existing assets such as time, money, and energy.

However, the advantage of investing is that you will receive a return. The return may include gains or losses incurred through the sale of real estate or investments. Meanwhile, it can also be through unrealized capital controls, investing income, or a combination of capital gains such as dividends, interest, rental income, etc. It can also include currency gains or losses due to exchange rate fluctuations.

What is an Investment?

Investment is an asset or item acquired for the purpose of generating revenue or valuation in the future. Valuation refers to an increase in the value of an asset over time. When an individual buys a commodity, the purpose is not to consume the commodity. The most intention is to use the commodity to create future wealth, and that is investing.

Moreover, Investing always includes specific assets such as time, money, or energy. With the aim to obtain a greater return in the future than the initial money invested.

Read Related: Money Management Definition: Simple Guide(+ tips & pdf)

How Does Investment Work?

Investing helps send your money an errand to work for you and your future goals. However, it’s more complicated than depositing your money directly into a savings account. Definitely, a saver can be an investor. Meanwhile, as investing is referred to as any mechanism used to generate future returns, it is associated with certain risks. Therefore, buying of bonds, stocks, or real estate, purchase of property used in producing goods are good examples of investing.

Remember, Investing may include losses or depreciation of assets acquired, which primarily differentiates it from savings.

Savings vs Investment

The primary difference between savings and investment is explained below.

  • Savings is money accumulated for future use and there is no risk involved.
  • While investments use the money for potential future benefits and there are certain risks involved.

Types of Investment

Think of different types of investments as useful tools to help you achieve your financial goals. Different types of investments, including bank stocks, bonds, and fixed income securities, have their own unique characteristics, risks, and methods available for you.

However, below are various types of investment available for everyone to key in, they include the following:

  • Stocks
  • Bonds
  • Investment Funds
  • Bank Products
  • Investing for Retirement
  • Options
  • Saving for Education
  • Insurance
  • Cryptocurrencies
  • Commodity Futures
  • Securities Futures
  • Alternative and Complex Products
  • Annuities
  • CDs

Investment Banks

Investment banks is an institution that provides different means of services to individuals and businesses. These services include designed means or methods to support individuals or businesses to increase their wealth.

Investment banks are usually involved when a company is preparing for an IPO for the first time or integrates with a competitor. Meanwhile, it also acts as an intermediary or financial adviser to clients of large institutions (such as pension funds), etc.

Major or global investment banks include JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Credit Suisse, and Deutsche Bank.

Investment Calculator

An investment calculator is used to calculating certain parameters of the investing plan. Use this calculator to do some calculations on your investment today. You should probably know the estimated return you are hoping to have in what you have invested in. This is why an investing calculator is so important.

Read Also: APR Definition: Simple Guide(+ how it works).

Conclusion

Investing is important for achieving your personal goals. It means that you have money, and you need to analyze how to invest this money so you can have profits in the future. However, If you start investing early and it goes well, you can make a lot of profits. Otherwise, you lose all the return you needed to start investing earlier.

In addition, you must first make an investing plan so that your investment will be successful. This will give you an idea of the challenges and the risks we have to deal with, which include also economic development, and more.

Chiemerie Ozurumba (Adorablepen) is a freelance writer, with a Degree in Computer Science & Programming. He is also a personal finance expert, blogger, public speaker, and poet. He has written so many amazing & creative scripts, articles, quotes, long & short stories, and poems to his credit. He is also a relationship, love & life coach.

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