Investment is the condition that we bought an asset or item today in hoping that it will appreciate or provide incomes in the future. In the view of Economics, investment is the purchase of goods that are not consumed today but it will be used in the future in order to provide wealth. In the view of Finance, investment is defined as possessing a monetary asset with the idea that it will provide extra income in the future or appreciate and then it will be sold at a higher price. Besides, investment usually involves in diversification of assets in order to avoid unnecessary and unproductive risk. Generally, Reilly and Norton (2001) stated that an investment is the current devotion of supplies for a period of time in the belief of accepting
Alternative investment is an investment in asset classes other than stocks, bonds and cash. There is no any precise term for the alternatives as its scope is very wide (Port, 2014). Alternative investment includes tangible assets such as art, wine, antiques, coins, precious metals or stamps and also some financial assets such as real estate fund, commodities, private equity, carbon credits, distressed securities, venture capital, film production and financial derivatives (Alternative Investment Companies, 2013). Investment in real estate and forestry, under this situation, are often considered as the ancient use of such real assets to enhance and preserve wealth. On the other hand, traditional investment refers to bonds, cash, and real estate (residential real estate, commercial real estate and real estate investment trust), also stocks and
Speculating is considered the high-risk trades while investing is considered the lower-risk investments based on fundamental and analysis. Investors who have a higher risk tolerance tend to go for high returns thru speculating. However, investors who cannot tolerance high risk will seek for average or below-average amount of risk with a satisfactory return. However, speculating is not same as gambling as speculators do make a more educated and knowledgeable decision more towards to trade which contain an above average of risk while gamblers do
People do not buy shares because they expect to receive a stream of future income in the form of dividends.
Speculation does not take place in a vacuum and therefore must come from somewhere. Galbraith points to the flow of gold into the United States from 1925 on and the subsequent reduction in the Federal Reserve rediscount rate as the first step. He immediately points out that available funds will not by itself lead to speculation. This is a fair assumption given that people with a substantial amount of savings or income are not always going to plunge into the market in order to double their money. In fact, Galbraith notes that the majority of people during this time did not have substantial savings or high incomes. The author also points out the lack of distribution of wealth as an underlying cause of the crash because the economy was dependent on the financial contributi...
Stock investment means you are purchasing a share of the company, therefore the company’s success determines the value of your investment. Buying stocks is not a difficult process; clarification of some important terminology and differentiation helps gives you the foundation to start investing.
... of owning them, but because we want to obtain profits from our original stock prices.
This paper will serve as a discussion on the topic of investment banking. In this paper the author includes various articles and thoughts that help to understand the background and principle of investment banking. This discourse will attempt to address this issue through explaining what investment banking is, introducing major investment bankers, and how investment banking affects our globally economy. Investment Banking Defined Investopedia (2008) stated this definition about investment banking, “A specific division of banking related to the creation of capital for other companies. Investment banks underwrite new debt and equity securities for all types of corporations.
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
The following essay will expand on the usefulness and flaws of CAPM and other asset evaluation frameworks and in the end showing that despite all the evidence against CAPM it is still a useful model for determining asset investments.
But, at the same time, investment is an addition to the capital equipment, and right from birth it competes with the older generation of this equipment. The tragedy of investment is that it calls forth the crisis because it is useful’.
One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land, buildings, machinery, etc., in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.
There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book “A Random Walk Down Wall Street”. What does a random walk mean? The random walk means in terms of the stock market that, “short term changes in stock prices cannot be predicted”. So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of “purchasing assets to gain profit in the form of reasonably predictable income or appreciation over the long term”. Speculating in a sense is predicting, but without sufficient data to support any kind of conclusion. What is investing? Investing in its simplest form is the expectation to receive greater value in the future than you have today by saving income rather than spending. For example a savings account will earn a particular interest rate as will a corporate bond. Investment returns therefore depend on the allocation of funds and future events. Traditionally there have been two approaches used by the investment community to determine asset valuation: “the firm-foundation theory” and the “castle in the air theory”. The firm foundation theory argues that each investment instrument has something called intrinsic value, which can be determined analyzing securities present conditions and future growth. The basis of this theory is to buy securities when they are temporarily undervalued and sell them when they are temporarily overvalued in comparison to there intrinsic value One of the main variables used in this theory is dividend income. A stocks intrinsic value is said to be “equal to the present value of all its future dividends”. This is done using a method called discounting. Another variable to consider is the growth rate of the dividends. The greater the growth rate the more valuable the stock. However it is difficult to determine how long growth rates will last. Other factors are risk and interest rates, which will be discussed later. Warren Buffet, the great investor of our time, used this technique in making his fortune.
Analyzing in terms of investment, if a private investor puts money into a company he has an expectation of both risk and return on the investment. Given a particular level of risk, the investment needs to be expected to have a particular level of return. For example, investment in a start-up needs to have the potential for a very high return, given the higher risk of failure, while investment in a large established business can be coupled with a lower expected return, given the lower risk of failure.
Modigliania, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review.
Investment is about choices and risk taking. It has the ability to generate profits or cause losses. The same concept implies in life. The choice that we made is an investment. It influences the goals we aspire to achieve. I aspire to build a successful career in Sales and Trading, and I believe choosing Imperial College Business School to do the Msc degree is a good investment.
more popular choices considered. Many of the same people who talk about investing in bonds,