Investment: A Brief Explanation

Investment is putting your money to buy financial instruments or assets in order to gain profit in terms of interest or income. It is the choice of an individual or corporation to put money in a vessel such as business management, property, stock or finance with certain risks that will provide the possibility of producing returns in a period of time. Investment always comes with the risk of losing the principal sum or commonly known as the capital. But the chances of losing can be minimized with proper analysis. There are generally 3 areas to invest in.

One area to invest in is the business management. Here, managers determine how much to invest in a company’s assets, whether they may be tangible or intangible. Tangible things include buildings and machineries while intangible things include softwares and patents. These assets are then used to generate a continuous flow of revenue to the company.

Financial investments involve the buying of financial paper such as securities and stocks or buying liquid real assets such as gold collectibles. Proper knowledge of valuation is needed in this type. One must have the knowledge of assessing whether a particular investment is worth its price. Profits will come when these are sold at a higher price.

Real estate involves the purchase of property and to have it held, resold or rented for the purpose of income. There are two areas of real estate to invest in, residential and commercial. Residential real estate involves many people and it involves the purchase of property that is to be used as a primary residence. In most cases, the buyer here does not have the money to purchase the property and must engage with a lending company, a bank for example. Commercial real estate involves the purchase of property to that is to be rented out. This includes commercial properties, retail spaces, apartments and hotels.

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