Monday, May 21, 2012

What Is An Investment?

Welcome to my blog on investments. My mission is to give you advice, tips and ideas on how, when and where to safely invest your hard-earned money. I shall endeavour to make my posts as globally relevant as possible. This way, you will have the opportunity to make use of the ideas contained therein, no matter where you reside on planet earth. Your constructive comments are very welcome.

To start with, what exactly is an investment? Well, an investment can take two basic forms. First, an investment can be the purchase of goods, supplies, tools, or equipment to use in the production of increasing profits. For example, a businessperson who produces shoes may purchase a machine that automatically stitches leather in the hopes that the time saved will allow for the production of more shoes and increased sales.

The second basic form an investment can take is what most of us think of when we say we are investing our money. That is, we use the money we have for the specific purpose of making more money from it.

There are several different ways of investing money in the hopes of gaining a profit. Stocks and bonds, exchanging currencies in the Forex market, annuities, certificates of deposit, mutual funds, buying real estate to sell at a profit later, even simple savings accounts, are all methods of investing. Even loaning your brother-in-law a few bucks (at a reasonable interest rate) to start a business is an investment.

Generally speaking, the riskier the venture is, the more opportunity there is to make a higher profit; the less risky, the lower the proceeds.

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A savings account has little or no risk whatsoever, therefore the return on this type of investment is weak. Of course, it's always a good idea to have liquid assets, and a savings account is one way to do so. Smart investors always have enough in their regular savings account to tide them over in the event of an emergency or job loss.

Purchasing stock in a company makes you part owner of that company. The two ways to make money from owning stock are to secure dividends and/or sell the stock for a higher price than what you paid for it. Sounds simple, right? Well, the basic concept is quite simple; it's the day-to-day reality of the stock market that makes this type of investment a bit more complicated. There is no guarantee whatsoever that the stock you choose will make a profit. In fact, you can easily lose your entire investment. The potential for a tremendous profit exists, however, if the stock (company) hits the big time.

When you are deciding how to invest your money, the two major considerations are; (1) How much of a return on your investment you want to see and (2) How much risk you are comfortable with. Once those two questions are answered, it is time for you to seek out an investment professional and start making yourself some money.

Now, having dealt with what an investment is basically is, it's time to take a plunge and get our feet wet. I am now going to discuss the various types and categories of investment in today's world. Please remember that your constructive comments are very welcome. Thank you.