Investment concepts that one should know
Investments are assets purchased to generate income. An asset is a resource owned or controlled by an economic or business entity. Assets can be divided into two broad categories: tangible and intangible assets The purpose is not consumption, but wealth creation.
Tangible assets are immaterial but beneficial resources because they give a company an advantage in the marketplace. These include: copyrights, patents, goodwill, computer programs and financial programs [bonds, stocks and financial investments]. Property, plant and equipment include current and fixed assets. Current assets include inventories, cash and accounts receivable, while fixed assets include equipment, property and land.
How does this work
The main objective of investing is to generate income and increase value over a period of time. Any action taken with the dream of earning future income is an investment.
However, investing often comes with risk. Not all investments will meet expectations. Investing can create wealth or lose value. For example, if you start a business and it doesn't turn a profit as expected, it goes out of business. Investing in a company can be bankrupt or unprofitable.
There are three main types of investment.
• Property investment
• Credit investment
1. Property investment
Without a doubt, this investment is the most profitable one. It ranges from real estate, stocks, companies and valuables.
The house meets the need for protection. With the current demand for homes, this investment is worth a shot. People move every day. Demand for rentals and apartments has been high. Home values can also rise or fall over time, depending on market conditions. You may have bought a house with the intention of selling it in the future, only to find that you cannot sell it for a higher price.
Equity is ownership of stocks or parts of a company. The value of a real estate investment increases over time. They also share profits, so investing in reputable companies is recommended. Some of these listed companies offer their clients benefits such as futures contracts. Let's take Apple as an example. The company's value has increased over the years since its inception, meaning that demand for anyone willing to invest has increased. You can make money by selling stocks.
Investing money to start and run a business is an investment. Selling products to people can be challenging because it's not just about selling products and giving you money. Plan it right, or it can cause huge losses.
Collectibles and Treasures
Designer pieces, autographed jerseys and items, paintings, precious stones, gold and diamonds are only considered investments if they are intended to be resold and make a profit. For this, they should be insured and in pristine condition. This increases or decreases their value.
2. Credit investment
Bonds issued by governments or corporations will determine a certain amount of interest and generate profits over time. Profits are relatively modest compared to real estate investments. The only risk is that the company or government goes bankrupt; bondholders may take the risk or earn less than expected.
Banks offer profits to investors who borrow money. Investors can lend to companies at higher interest rates. The risk factor is zero.
Cash equivalents can be easily and quickly converted to cash. An example is money market funds. The investor keeps the funds in his account for a minimum of three months and a maximum of one year. This money generates income over time. It's a flexible investment where you can sign checks against your deposits; however, once you start writing checks, the value of the investment is wiped out.