Archive for June 19th, 2008

Basic concepts of investing

Posted on June 19th, 2008 by admin, under Stocks.

Investment is any tool, in which you can put the money, hoping to keep or to multiply their value and (or) to ensure a positive value of income. In the broadest sense investment is mechanism necessary for financing the economy growth.

Free money can not be considered an investment because the value of money will gradually be absorbed by inflation, and thus there will be no income. Bank deposit is considered an investment because it guarantees a certain income.

Securities or ” stock values” are investment instruments, confirmative a debt obligation (bond) or right to participate in the income of company (action).

Investing in “real assets” are investing in acre, real estate, in own business. A direct investment is buying of securities directly by an investor. Indirect investments are investments through collective funds.

The risk level is the most important characteristic of investments. In the area of finances risk means possibility of adverse end of investing. This is possibility of not to receive supposed profit or to receive loss. As a rule, higher risks are peculiar to high-yield instruments of investing, and vice versa – low risks usually means low profitability.

Investments are divided into “short-term” and “long-term”. Short-term investments are usually up to a year, and long-term ones – more than a year. We are entitled to expect a higher profits on average in the case of long-term investments.

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