Investment

• Investment can be defined in many ways according to different theories and principles.
• Investment is the application of money to earn more money.
• Investment also means savings or savings made through delayed consumption.
• The number of compounding periods during each time frame is an important determinant in the time value of the money formula.
• According to economics, investment is the utilization of resources in order to increase income or production output in the future.
• An amount deposited into a bank or machinery that is purchased in anticipation of earning income, in the long run, is an example of investment.
• Investment carries slightly different meanings to different industrial sectors.
• According to economists, investment refers to any physical or tangible asset, for example, a building or machinery and equipment.
• Finance professionals define an investment as money utilized for buying financial assets, for example, stocks, bonds, bullion, real properties, and precious items.
• Finance defines the practice of investment as the buying of a financial product or any valued item with anticipation that positive returns will be received in the future.
• Financial investments carry high market liquidity.
• The method used for evaluating the value of a financial investment is known as valuation.
• Business theories define investment as the activity in which a manufacturer buys a physical asset, for example, stock or production equipment, in the expectation that this will help the business to prosper in the long run.
• Investments may be classified as financial investments or economic investments.
• Institutional investors are large companies with access to numerous resources, allowing them to oversee their portfolio on a daily basis and enter and exit the market at the right time.
• Individual investors need to make decisions on their own through research and available data.
• Decision-making in institutional investments is usually overseen by different individuals in the organization, making the process more challenging as people are likely to propose different ideas on what trades to make.
• As an individual investor, you are the sole decision-maker when it comes to buying and selling shares.
• Institutional investors are privy to investment structures and products available before anyone else, allowing them to identify investment opportunities before they reach the individual investor level.
• The time value of money (TVM) is the concept that money you have now is worth more than the identical sum in the future due to its potential earning capacity.
• The time value of money draws from the idea that rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time.
• The formula for computing the time value of money considers the payment now, the future value, the interest rate, and the time frame.
• Finance investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principal amount, as well as security of return, within an expected period of time.
• Speculation or gambling is putting money into something without thorough analysis, without security of principal, and without security of return.
• Investment is related to saving or deferring consumption.
• Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.
• Economic investments are undertaken with the expectation of increasing the current economy’s capital stock which consists of goods and services.
• Capital stock is used in the production of other goods and services desired by society.
• Investment in this sense implies the expectation of the formation of new and productive capital in the form of new constructions, plant and machinery, inventories, and so on.
• These activities are undertaken by corporate entities that participate in the capital market.
• Financial investments and economic investments are, however, related and dependent.
• The risk of an investment depends on factors such as the investment maturity period, the issuing body, the type of security, and the degree of variability of returns.
• Safety refers to the protection of the investor's principal amount and expected rate of return.
• Liquidity refers to an investment ready to convert into a cash position.
• Investors can categorize savings options according to three fundamental characteristics: safety, income, and growth.
• There is no such thing as a completely safe and secure investment, but government-issued securities in stable economic systems or corporate bonds issued by large, stable companies are arguably the best means of preserving principal while receiving a specified rate of return.
• The safest investments are found in the money market, which includes Treasury bills (T-bills), certificates of deposit (CD), commercial paper or bankers' acceptance slips, and in the fixed-income (bond) market, in the form of municipal and other government bonds and corporate bonds.
• As they increase in risk, these securities also increase in potential yield.
• There's an enormous range of relative risk within the bond market, from government and high-grade corporate bonds, which are considered some of the safest investments around, to junk bonds, which have a lower investment grade and may have more risk than some of the more speculative stocks.
• Corporate bonds are not always secure, although most instruments from the money market are considered safe.