"Investment is traditionally defined as the 'commitment of resources to achieve later benefits'."
The act of committing money to a particular financial instrument or asset in the hope of earning a profit or an income.
Importance of Investment: Understanding the importance of investment and its benefits is the starting point for any personal finance journey.
Types of Investments: Familiarizing oneself with different types of investment options such as stocks, bonds, mutual funds, exchange traded funds (ETFs), real estate, and commodities.
Risk and Return: Understanding the concept of risk and return, and how one can earn returns by taking calculated risks in the financial markets.
Investment Strategy: Developing a personalized investment strategy that suits your financial goals, investment horizon, and risk tolerance level.
Portfolio Management: Managing an investment portfolio that is diversified across asset classes and individual investments to mitigate risks.
Asset Allocation: Deciding on how to allocate investments across different asset classes, balancing risk and return, including the investment time horizon.
Tax Planning: Minimizing tax implications of investments through tax-deferred accounts, offsetting capital gains with losses, and claiming deductions and credits.
Financial Planning: Developing a holistic financial plan that includes investment goals and strategies, risk management, retirement planning, and estate planning.
Investment Instruments: Understanding the workings and features of various investment instruments such as bonds, stocks, derivatives, futures and options, and investment trusts.
Market Analysis and Research: Conducting market analysis and research, including evaluating market trends, financial statement analysis, and identifying high potential investment opportunities.
Fundamental Analysis: Evaluating a company’s financial health, management quality, industry dynamics, and underlying economic factors to determine its investment potential.
Technical Analysis: Analyzing market trends, patterns, and charts and using technical tools to identify buy and sell signals for investment decisions.
Behavioral Finance: Understanding how human biases and emotions influence investment decisions and developing strategies to overcome them.
Investment Performance Evaluation: Evaluating the investment portfolio’s performance through benchmarks, investment ratios, and other evaluation techniques.
Investment Risks: Understanding the different types of investment risks, including market risk, interest rate risk, credit risk, liquidity risk, operational risk, and geopolitical risk.
Stocks: Ownership in a company that can increase or decrease in value.
Mutual Funds: A collection of stocks or bonds from multiple companies owned by a group of investors.
Bonds: A loan to a company or government that pays interest over a set period of time.
Real Estate: Property ownership, including rental properties or flipping homes.
Certificates of Deposit: A set amount of money deposited in a bank for a fixed period of time, with a fixed interest rate.
Exchange-Traded Funds (ETFs): Like mutual funds, but traded on the stock market like a stock.
Options: A contract giving the investor the right, but not the obligation, to buy or sell an asset at a set price before a specific date.
Futures: Similar to options, but with a legal obligation to buy or sell an asset at a set price at a future date.
Annuities: An investment contract with an insurance company that pays out a fixed income in the future, often used for retirement planning.
Commodities: Raw materials or primary agricultural products, like gold or oil, used for trading.
Cryptocurrencies: Digital or virtual currencies like Bitcoin, often used as a store of value or for online transactions.
Hedge Funds: A pool of money from multiple investors, managed by a professional fund manager who makes risky or unconventional investments.
Venture Capital: Investing in early-stage companies with high growth potential.
Art and Collectibles: Investing in art or unique items that can appreciate in value over time.
Peer-to-Peer Lending: Investing in loans issued to borrowers through an online platform, often at higher interest rates than traditional banks.
"If an investment involves money, then it can be defined as a 'commitment of money to receive more money later'."
"An investment can be defined as 'to tailor the pattern of expenditure and receipt of resources to optimize the desirable patterns of these flows'."
"The net monetary receipt in a time period is termed as cash flow."
"Money received in a series of several time periods is termed as a cash flow stream."
"The purpose of investing is to generate a return from the invested asset."
"The return may consist of a gain (profit) or a loss realized from the sale of a property or an investment, unrealized capital appreciation (or depreciation), or investment income such as dividends, interest, or rental income, or a combination of capital gain and income."
"Investors generally expect higher returns from riskier investments."
"When a low-risk investment is made, the return is also generally low. Similarly, high risk comes with a chance of high losses."
"Investors, particularly novices, are often advised to diversify their portfolio."
"Diversification has the statistical effect of reducing overall risk."