| Investment Facts |
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| Written by Thomas Goldman |
| Thursday, 27 May 2010 19:25 |
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The concept of "investment" means purchasing assets. The word "asset" means something which is likely to generate an increase in value. That can either mean cash flow or an increase in the intrinsic value of the asset itself. Work is different from investment in that the worker receives cash in exchange for effort. Investment is performed at all scales from that of the individual right up to a whole country.
The concept of "investment" means purchasing assets. The word "asset" means something which is likely to generate an increase in value. That can either mean cash flow or an increase in the intrinsic value of the asset itself. Work is different from investment in that the worker receives cash in exchange for effort. Investment is performed at all scales from that of the individual right up to a whole country. Every business is involved in investment as it uses the assets it owns or controls to generate an increase in value in terms of either cash flow or increasing asset values. These assets used by a business can be either physical or not. Assets all have a degree of risk, as well as a likelihood of generating value. Assets might include such things as property, land, commodities, stocks, bonds, financial derivatives such as futures or options, or a business. Different assets have different amounts of risk as well as generating differing amounts of value. A major part of the decisions made in investing involve the estimation of both the risks and possible returns relating to a particular asset. Assets not only risk not generating an increase in value, they also risk becoming less valuable themselves so that the investor can lose some or all of the original sum used to purchase the asset itself. Also the rate of risk and the rate of return usually changes over time. Real estate is a common type of investment asset although there are considerable misunderstandings about the concept or real estate investment, and many actions that someone might consider to be real estate investment are really real estate speculation. Residential real estate is the most common area of real estate investment and is generally considered to have less risk than commercial real estate. Other types of assets people invest in can include such things as stocks, shares, commodities, jewelry, bonds, art, metals (such as gold or silver), and many others. As with any form of investment, each of these assets has a degree of risk as well as a likelihood of generating an increase in value over time. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Want to find out more about Money and Finance, then visit Thomas Goldman's article site (2000 articles and counting!) on how to choose the best investments for your needs. |
| Last Updated on Saturday, 29 May 2010 16:43 |