InvESTMENT refers to your financial or monetary action done with your money. The word is very general and it can mean different things to different people depending on their situation and goals. Involvement is the driving force behind making investments. There are many ways of investing money and you should decide what type of investments are right for you based on your goals and needs.
To invest in business is to commit money with an expectation of a return/profit in the near future. Simply put, to invest in business means buying an asset or a commodity with the intention of generating rental income from the investment, an increase in the overall value of the commodity or the underlying asset, over a defined period of time or an interval of time. Some examples of these types of investments are fixed income investments such as bonds and certificates of deposits, equities such as equities in listed companies, and derivatives such as options, currencies, commodities and foreign exchange traded products. The investor will use the investment to increase its net worth and hopefully create a profit. Many investors use business capital funds to make larger profit through the sale of company shares.
An important way of choosing investments is to determine how much risk is involved, especially if the investment is to be held for a long period of time, and how much you are willing to lose. Investments can be made in virtually every area of life; they are usually made in labour and raw materials, machinery and products used in production, financial markets and products sold for consumption. The broad categories include fixed income, stock market investment securities, mutual funds and other money market instruments, bonds, commodities, and foreign exchange traded products.
Bond interest and bond trading are considered safe investments but are also susceptible to credit risk, changes in interest rates and inflation. Fixed income securities include bonds, stocks, mutual funds and insurance products such as equities, commodities and securities. The most familiar type of equity is probably the equity in a company. However, other forms of equity include debentures, preferred stocks, units and mutual funds. The value of stocks depends on their price and the supply and demand for them. Other common types of bonds are municipal, commercial and corporate bonds.
Individual stocks may also be included in investment funds. The most popular type of investment funds today are those made up of savings accounts, stocks and bonds. Money market funds and certificates of deposits (CDs) are examples of savings accounts. Money market funds buy government securities, such as U.S. Treasuries, long-term certificates of deposit (LCDs), CDs and money market funds are popular investments made up of savings accounts.
Mutual funds are another category of investment. They are managed by professional investment advisers who buy and sell various investments in different sectors and industries according to their performance. Unlike individual stocks and bonds, investments in mutual funds remain secure for several years unlike stocks and bonds where returns are seen only over a short period of time. The best way to make money from mutual funds is to invest in ones that have been actively managed by professionals for years now.