Investment is the activity of placing capital in the form of money or other valuable assets into an object, institution, or party, hoping that the investor will benefit after a certain period. Because of the hope of getting profits in the future, this investment is also known as investment. The term investment itself comes from the Italian word, investire, which means to use or use. Generally, funds or assets invested by an investor will be developed by the agency or party that manages it. The profits from the development will be distributed to investors as a return in accordance with the provisions between the two parties.
Economically, in investment, investors will buy something that will not be used now. Something that is purchased and stored as property that can change in value after a certain period of time. However, keep in mind that investment does not always lead to profit. There is also a risk of loss in investing. Therefore, it is very important to understand the types of investments and their risks.
For instance, you bought 2 ozs of gold bullion for USD 1,700 per ounce in 2016. The gold is kept tightly in his personal safe. After five years, the price of gold per gram increased to USD 1,800 per ounce. Knowing this, you sell your gold bullion and earn a profit of USD 100 per ounce. This act buying gold in 2016 is what is known as an investment. And the profit of $100 from the difference in the purchase price is called profit.
Now, it is time for you to know more about investment, as we have prepared several aspects about investments that you should understand below.
From that brief example, gaining profit is a sample of obvious objective that many people seeks from investment. In reality, many investors come from different reasons about why they utilize this financial act. There are some significant goals of investing:
To get a steady income
To obtain a more decent and stable life in the future.
Helpful in developing a business
Get a guarantee in business
Establish and control funds for a special interest, such as social interests, expansion interests, etc.
Reducing inflationary pressure
You should notice that gaining profit is merely the basic objective that investors seek from the list above. From there, some investors use it as a medium to have a steady income, having a stable life when retirement comes, use it for your business’s future development, and so on.
After knowing the types of investments, the rows of these types of investments are also grouped into two different forms, namely:
Real Asset Investment: This investment is made by a person in both visible and invisible forms, such as land investment, metal investment, property investment, etc.
Investment in Financial Assets: Investors’ investment in financial assets is carried out as a form of securities. For example, investment deposits and stocks.
Types of Investment
At this point, you have understood if there are several purposes and forms of investments, you need to know about its type as well. Understanding this will help you get a glimpse of what kind of investment type is suitable for you. There are many types of investments currently available, including:
Mutual Fund Investment
In addition, there are two types of investments that are categorized based on their period, namely:
Short Term Investment
Short-term investments allow you to make a profit of fewer than three years, and you can immediately convert it into cash or sell it. However, keep in mind that this short-term investment provides a smaller return so that it is suitable to meet needs in the near future. Examples of short-term investments are short-term bonds, the stock market, certificates of deposit.
Long term investment
Long-term investments are investments that take more than three years to make a profit. You can enjoy the results of this investment in five years, a dozen years, to decades to come. The return generated by long-term investments is, of course, also greater than short-term investments. This type of investment is perfect for those of you who need savings for future needs such as education costs, marriage needs funds, pension funds, and so on. Examples of these investments are gold and stock investments.
Now, you should have a better comprehension of investment. Consequently, as an investor, this is the time where you should keep increasing your knowledge about investment. In doing so, you will know how to react to particular market conditions. Suppose you need more insights about this subject and related topics about it. It would be best if you visited investmenthoney.com. This is the site where you can find any information you need regarding investments.