To invest is to put money into the hope of some return/benefit in the near future. Simply put, to invest simply means buying an asset or an object with the intention of making a profit from the investment or simply the appreciation of that asset over a certain period of time. In the financial markets, an investment refers to any money or assets that are used as collateral in order to obtain funds for a planned purpose. The key purpose of all investments is to make money. There are different types of investments including stocks, bonds, mutual funds, real estate and foreign exchange.
Investment Factors
There are many different factors that go into determining the cost of an investment such as the current market interest rates, the amount of risk (how likely it is that the investment will lose value), and time duration of the investment. It is best to diversify your investments by investing in a wide variety of assets that are not correlated to one another. You should also try to keep your investments to about five percent of your overall net worth. Of course, these are just guidelines.
Stocks
Stocks are considered a growth investment. Stocks are usually sold for a profit, but they can also be held for the long term as a preservation fund. A preservation fund normally holds stocks that are still at their initial public offering (or IPO) price. These are typically called growth stocks. A growth stock will usually appreciate significantly over the long term due to its price being close to its intrinsic value.
Bond markets
Bond markets are a type of mutual fund. They consist of bond issues that pay higher interest rates than conventional mutual funds. Bond issues are held for the long term and do not pay dividends. To invest in these types of bonds you need to have money available in order to purchase them. Because most bond issues to pay very high dividends (at least 90 percent versus the rate of inflation), they make good growth investments.
Real estate investing
The last main type of investment is real estate investing. Properties can be purchased from the land itself or through financing. You can start investing in residential properties as soon as you own the property and have a contract in place with a developer. Residential properties will usually appreciate in value and you can turn a profit when selling or trading them.
Many people are discouraged by the thought of having to borrow money to start an investment portfolio. However, if you are working with a small amount of cash then you can either borrow money from family or friends or use a credit card to obtain small amounts of cash on a regular basis. You will want to limit yourself to just enough cash to cover your regular expenses. It is a good idea to set up a savings account as well. This way, should you need some extra cash, you can draw from this account without having to tap your checking account.
Penny stocks
One final option for growth investment is penny stocks. These types of shares have been known to have very high dividend payments and are easy to buy and sell. This is another situation where it is not a good idea to borrow money. Although some companies that offer penny stocks may offer dividends that you won’t see in your regular investments, the payouts for these stocks are usually low and do not have a great chance of paying off in a short amount of time.
Investment opportunities
Most people will agree that you need to keep your eyes open for great investment opportunities. There are so many different options out there that it can be difficult to choose the ones that will be the best fit for your specific investment goals. If you are interested in growing your portfolio and earning a bit more income, then think about the options discussed in this article.
