Investment, What Does It Mean?
Investing is the name for buying an asset. An "asset" is something which generates value. This value can be either an income which the asset generates or some kind of increase in the value of the asset itself. Investing is different from work where the worker gets paid for their effort or time. Investment is something which happens at all scales from individuals up to whole countries, as well as families and corporations.
Investment risk not only includes the risk that no increase in value will be generated by the asset, but also the risk that the asset itself will decrease in value to some extent (or even become worth nothing at all). Risk and return will vary over time.
Assets all have a degree of risk as well as a likelihood of generating value. Assets might include such things as property, commodities, stocks, bonds, land, financial derivatives such as futures or options, or businesses. Different assets have different amounts of risk as well as the likelihood of generating differing amounts of value. A major part of the decisions made in investing involve the estimation of both the risks and possible returns relating to a particular asset.
Every business is involved in investment as it uses the assets it owns or controls to generate an increase in value in terms of either cash flow or increasing asset values. These assets used by a business can be either physical or not.
Real estate is a common form of investment, and residential real estate is usually considered to be less risky than commercial real estate. There are lots of misunderstandings about real estate investment, including false concepts on what investment is compared to speculation.
Other assets used for investment can include such things as stocks, shares, jewelry, bonds, art, commodities, metals (such as gold or silver), and many other things. As with any type of investment, there will always be risks associated with each of these asset categories as well as the potential gains in value from owning them for a particular period of time.
Article Source: FxTradingStock.com
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Want to find out all about Money and Finance, then visit Thomas Goldman's great site on how to choose the best investments for your needs as well as other money and finance topics.
by: Thomas Goldman
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Word Count: 353
Date: Thu, 27 May 2010
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