What Is investing And What Can It Do For You?Investing - What It Means
Knowing what an investment is will help you make the best decision to grow your money and put it to work to obtain returns and increase your wealth.
What is Investing?
To understand what an investment is, we must know that it implies the certainty of the possibility of obtaining profit after carrying out a specific economic or financial action and guarantee that certainty with money. This is one of the most common ways to put money to work for you.
To be sure that this certainty of obtaining profits is a great possibility, it is required to do an in-depth analysis before the action of placing money in that certainty. Without research, you do not invest, and you bet and, as you know, bets are riskier.
In more concrete economic terms, in an investment, a certain amount of money is assigned at the disposal of third parties to obtain monetary returns in the form of profit, previously calculated and established in advance.
What Are The Types Of Investments?
Investments are divided into two according to the type of expected results: business and financial. Business companies are those that place money in the hands of entrepreneurs for a company to develop and make profits over time. In that case, investors expect a return on investment established from the beginning, according to the growth possibilities that are projected.
Financial investments are those that acquire securities related to the financial market, to obtain profits from the capital placed through the behaviour of those assets. These types of investments are the most common, as there are different options with different rules and specific returns for each of them.
It doesn’t sound straightforward, but it’s the investments you hear about in business segments on the news. Each of the securities traded is assigned a performance study that is used by investors to analyze their chances of obtaining profits after placing their money.
Financial investments are divided in different ways:
Short-term investments present options for making a quick buck; however, they are also very risky. Long-term investments offer better opportunities to generate more money and provide more security, with the disadvantage of having a lot of flow or liquidity.
When divided by type, they can be one of the following: money market, bonds, equities, Forex market, stocks, stock indices, metals, commodities.
Now that you know what an investment is, we recommend seeking the help of specialists who can advise you on this issue.
How Does The Investment Work?
The very notion of investment should not scare you. By being banked (customer of a bank), you are already investing your money!
When your salary is domiciled in a banking establishment, and you transfer part to your funds to govt funds, your savings can be used to finance social housing construction programs, actions, projects local authorities or to repay part of your countries debt. Your bank nevertheless guarantees your money.
Overall, many people have little knowledge of finance, its workings, its opportunities and its pitfalls—no finance lessons at school, high school, or even university, except in dedicated courses.
What Can Investment Do For You?
To answer this question is very simple and short. You are investing to make your money grow.
There are many reasons for doing so:
- Ensure financial security (for retirement, for your descendants, to reassure yourself)
- Build up savings for future expenses in the medium or long term (real estate purchase, children’s studies, business creation)
- Create their heritage to pass it on to their descendants
- To ensure a supplementary pension at retirement, rental investment or life insurance can be good options.
The range of investments is vast, here we present the main ones:
- Their advantages
- Their disadvantages
- Their possible evolutions
Who Can Invest?
Everybody. The diversity of financial investments (banking products, precious metals, stock market, business, real estate, etc.), which can be tailored to suit all demands, allows all individuals to invest. Whether it is to optimize a limited budget or achieve long-term capital gains, there are countless investment solutions.
It is about mobilizing part of your money in the purchase of a product (real estate, banking, stock market) to make it grow. The indicator to measure the quality of an investment is the risk/return ratio.
In terms of investment, the risk incurred can go up to the complete loss of the amount initially invested, or even more, while the potential gain is proportional to the level of risk chosen.
Profitability can be quickly estimated by calculating the difference between the amount of money initially invested and that available at the end of the investment. If it is greater, the operation is positive.