WHAT IS INVESTMENT

An investment is an asset or item acquired with the goal of generating income or appreciation. when an individual purchase a good as an investment, the intent is not to consume the good but rather to use in the future to create wealth.

An investment always concerns the outlays of some resource today- time, efforts, money, or an asset- in hope of a greater payoff in the future than what was originally pull in.

KEY POINTS.

• An investment involves putting capital to use today in order in value overtime.
• An investment requires putting capital to work, In the form of time, money, effort etc,
• Investment usually do not come with guarantees of appreciation; it is possible to end with less money than what you started.
• Investment can be diversified to reduce risk, through this may reduce the amount of earning potential.

10 things to consider before you take investing decision.         

1. Draw a personal financial roadmap.
2. Evaluate your comfort zone in taking on risk.
3. Consider an appropriate mix of investments.
4. Be careful if investing heavily in shares of employer’s stock or any individual stock.
5. Create and maintain emergency fund.
6. Payoff off high interest credit first.
7. Consider dollar cost averaging.
8. Take advantage of free money from employer.
9. Consider rebalancing portfolio occasionally.
10. Avoid circumstances that can lead to fraud.

Types of investment.    

There is arguably endless opportunity to invest; after all upgrading the tires on your vehicle could be seen as investment that enhance the usefulness and future value of asset.

  Following are the type of investment.

    Stocks/ Equities

                A share of stock is a piece of ownership of public or private company. By owning stock, the investor may be entitled to dividend distributions generated from the net profit of company.  As the company became more successful and other investor seeks to buy that company’s stock, it value can also appreciate and be sold for capital gains.

    Equity shares:

                A company issue equity shares to raise capital at the cost of diluting its ownership. Investors can purchase units of shares to get part ownership of the firm. By purchasing the equity shares, investors will be contributing towards the total capital of the company and becoming its shareholder.

Key points:

• Equity shareholders receive the profit a company makes.
• The value of share is the face value or book value.