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c   is putting money into something with the hope of profit.

More specifically, investment is the

commitment of money or capital to the purchase of financial instruments or other assets so as to gain
profitable returns in the form of interest, income (dividends), or appreciation (capital gains) of the value of
the instrument. It is related to saving or deferringconsumption. Investment is involved in many areas of
the economy, such as business management and finance no matter for households, firms, or
governments. An investment involves the choice by an individual or an organization, such as a pension
fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such
as property,commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset
denominated in foreign currency, that has certain level of risk and provides the possibility of generating
returns over a period of time.

Investment comes with the risk of the loss of the principal sum. The investment that has not been
thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of
losing money is not within the owner's control. The difference between speculation and investment can be
subtle. It depends on the investment owner's mind whether the purpose is for lending the resource to
someone else for economic purpose or not.[3]

In the case of investment, rather than store the good produced or its money equivalent, the investor
chooses to use that good either to create a durable consumer or producer good, or to lend the original
saved good to another in exchange for either interest or a share of the profits. In the first case, the
individual creates durable consumer goods, hoping the services from the good will make his life better. In
the second, the individual becomes an entrepreneur using the resource to produce goods and services
for others in the hope of a profitable sale. The third case describes a lender, and the fourth describes an
investor in a share of the business. In each case, the consumer obtains a durable asset or investment,
and accounts for that asset by recording an equivalent liability. As time passes, and both prices and
interest rates change, the value of the asset and liability also change.

An asset is usually purchased, or equivalently a deposit is made in a bank, in hopes of getting a

future return or interest from it. The word originates in the Latin "vestis", meaning garment, and refers to
the act of putting things (money or other claims to resources) into others' pockets.[4] The basic meaning of
the term being an asset held to have some recurring or capital gains. It is an asset that is expected to
give returns without any work on the asset per se. The term "investment" is used differently in economics
and in finance. Economists refer to a real investment (such as a machine or a house), while financial
economists refer to a financial asset, such as money that is put into a bank or the market, which may then
be used to buy a real asset.
In economic theory or in macroeconomics, investment is the amount purchased per unit time
of goods which are not consumed but are to be used for future production. Examples
include railroad or factory construction. Investment in human capital includes costs of additional schooling
or on-the-job training. Inventory investment refers to the accumulation of goodsinventories; it can be
positive or negative, and it can be intended or unintended. In measures of national income and
output, ›    (represented by the variable c) is also a component of Gross domestic
product (^ ), given in the formula ^  =  + c + ^ + , where  is consumption, ^ is government
spending, and  is net exports. Thus investment is everything that remains of total expenditure after
consumption, government spending, and net exports are subtracted (i.e.  = ^  - Ñ - ^ - ).

   is the commitment of funds into financial instruments, such as
securities, bonds, real estate and currencies. The term ³investment´ is closely related to
the disciplines of finance and economics and essentially refers to ³savings´ or ³deferred
consumption,´ which involves purchasing an asset or making a deposit in a bank in the
hope of future returns.

The term ³investment´ is used differently in economics and finance. By the term
investment, an economist refers to real investment, such as in a machine or a house.
On the other hand, a finance professional would refer to a financial asset as an
investment. Such financial assets could be money that is deposited in a bank or
invested in the money market.

Financial investments are of several types, including equities, debt instruments,
derivatives, currencies and real estate. These financial assets are acquired with the
expectation of future cash flows and may increase or decrease in value resulting in
capital gains or losses to investors.

People invest spare money to offset the effect of inflation on idle cash as well as to
benefit from an additional source ofincome and capital appreciation. Financial
investments are typically made indirectly via intermediaries such as banks, insurance
companies, mutual funds, pension funds, collective investment schemes and
investment clubs. An intermediary generally makes investments using the money from
many individuals.

c     ›
Exchanges are financial markets where financial products are traded. There are various
kinds of exchanges, such as stock exchanges, futures exchanges and commodity
exchanges. These exchanges formulate their own rules and procedures for
smooth transactionsand ensuring fairness for all investors.
The exchanges are guided by regulating agencies. For instance, the Securities and
Exchange Commission (SEC) is the watchdog of the American stock market, while
the Securities and Exchange Board of India (SEBI) regulates the Indian stock market.

The various markets for financial investment are:

Bond Market ± The following products trade in this market:

÷ Fixed income
÷ Corporate bond
÷ Government bond
÷ Municipal bond
÷ Bond valuation
÷ High-yield debt

Stock (Equities) Market ± The following financial instruments trade in this market:

÷ Stock
÷ Preferred stock
÷ Common stock
÷ Registered share
÷ Voting share

Forex Market ± The following financial instruments trade in this market:

÷ Currency
÷ Currency futures
÷ Non-deliverable forward
÷ Forex swap
÷ Currency swap
÷ Foreign exchange options

Derivatives Market - The following financial products trade in this market:

÷ Credit derivative
÷ Hybrid security
÷ Options
÷ Futures
÷ Forwards
÷ Swaps
Commodity Market

Money Market

Spot Market

OTC Market

Real Estate Market

The broad range of investment opportunities represents varied levels of risks and
rewards. Success in financial investment requires good knowledge of investing. Instead,
one could seek the help of financial advisors, who use various technical and
fundamental analysis tools to manage portfolios.

r c   

The options for investing our savings are continually increasing, yet every single investment vehicle can
be easily categorized according to three fundamental characteristics - safety, income and growth - which
also correspond to types of investor objectives. While it is possible for an investor to have more than one
of these objectives, the success of one must come at the expense of others. Let's examine these three
types of objectives, the investments that are used to achieve them and the ways in which investors can
incorporate them in devising a strategy.

Perhaps there is truth to the axiom that there is no such thing as a completely safe and secure
investment. Yet we can get close to ultimate safety for our investment funds through the purchase of
government-issued securities in stable economic systems, or through the purchase of the highest
quality corporate bondsissued by the economy's top companies. Such securities are arguably the best
means of preserving principal while receiving a specified rate of return.

The safest investments are usually found in the money market and include such securities as Treasury
bills (T-bills), certificates of deposit (CD), commercial paper or bankers' acceptance slips; or in the fixed
income (bond) market in the form of municipal and other government bonds, and in corporate bonds. The
securities listed above are ordered according to the typical spectrum of increasing risk and, in turn,
increasing potential yield. To compensate for their higher risk, corporate bonds return a greater yield than
T-bills. (For more insight on treasuries, read r   

It is important to realize that there's an enormous range of relative risk within the bond market. At one end
are government and high-grade corporate bonds, which are considered some of the safest investments
around; at the other end are junk bonds, which have a lowerinvestment grade and may have more risk
than some of the more speculative stocks. In other words, it's incorrect to think that corporate bonds are
always safe, but most instruments from the money market can be considered very safe.

The safest investments are also the ones that are likely to have the lowest rate of income return, or yield.
Investors must inevitably sacrifice a degree of safety if they want to increase their yields. This is the
inverse relationship between safety and yield: as yield increases, safety generally goes down, and vice

In order to increase their rate of investment return and take on risk above that of money market
instruments or government bonds, investors may choose to purchase corporate bonds or preferred
shares with lower investment ratings. Investment grade bonds rated at A or AA are slightly riskier
than AAA bonds, but presumably also offer a higher income return than AAA bonds. Similarly, BBB rated
bonds can be thought to carry medium risk but offer less potential income than junk bonds, which offer
the highest potential bond yields available, but at the highest possible risk. Junk bonds are the most likely
to default.

Most investors, even the most conservative-minded ones, want some level of income generation in their
portfolios, even if it's just to keep up with the economy's rate of inflation. But maximizing income return
can be an overarching principle for a portfolio, especially for individuals who require a fixed sum from their
portfolio every month. A retired person who requires a certain amount of money every month is well
served by holding reasonably safe assets that provide funds over and above other income-generating
assets, such as pension plans, for example.


This discussion has thus far been concerned only with safety and yield as investing objectives, and has
not considered the potential of other assets to provide a rate of return from an increase in value, often
referred to as a capital gain. Capital gains are entirely different from yield in that they are only realized
when the security is sold for a price that is higher than the price at which it was originally purchased.
Selling at a lower price is referred to as a capital loss. Therefore, investors seeking capital gains are likely
not those who need a fixed, ongoing source of investment returns from their portfolio, but rather those
who seek the possibility of longer-term growth.

Growth of capital is most closely associated with the purchase of common stock, particularly growth
securities, which offer low yields but considerable opportunity for increase in value. For this reason,
common stock generally ranks among the most speculative of investments as their return depends on
what will happen in an unpredictable future. Blue-chip stocks, by contrast, can potentially offer the best of
all worlds by possessing reasonable safety, modest income and potential for growth in capital generated
by long-term increases in corporate revenues and earnings as the company matures. Yet rarely is any
common stock able to provide the near-absolute safety and income-generation of government bonds.

It is also important to note that capital gains offer potential tax advantages by virtue of their lower tax rate
in most jurisdictions. Funds that are garnered through common stock offerings, for example, are often
geared toward the growth plans of small companies, a process that is extremely important for the growth
of the overall economy. In order to encourage investments in these areas, governments choose to tax
capital gains at a lower rate than income. Such systems serve to encourage entrepreneurship and the
founding of new businesses that help the economy grow.


An investor may pursue certain investments in order to adopt tax minimization as part of his or her
investment strategy. A highly-paid executive, for example, may want to seek investments with favorable
tax treatment in order to lessen his or her overall income tax burden. Making contributions to an IRA or
other tax-sheltered retirement plan, such as a401(k), can be an effective tax minimization strategy. (For
related reading, see X 



Many of the investments we have discussed are reasonably illiquid, which means they cannot be
immediately sold and easily converted into cash. Achieving a degree of liquidity, however, requires the
sacrifice of a certain level of income or potential for capital gains.

Common stock is often considered the most liquid of investments, since it can usually be sold within a
day or two of the decision to sell. Bonds can also be fairly marketable, but some bonds are highly illiquid,
or non-tradable, possessing a fixed term. Similarly, money market instruments may only be redeemable
at the precise date at which the fixed term ends. If an investor seeks liquidity, money market assets and
non-tradable bonds aren't likely to be held in his or her portfolio.

As we have seen from each of the five objectives discussed above, the advantages of one often comes at
the expense of the benefits of another. If an investor desires growth, for instance, he or she must often
sacrifice some income and safety. Therefore, most portfolios will be guided by one pre-eminent objective,
with all other potential objectives occupying less significant weight in the overall scheme.

Choosing a single strategic objective and assigning weightings to all other possible objectives is a
process that depends on such factors as the investor's temperament, his or her stage of life, marital
status, family situation, and so forth. Out of the multitude of possibilities out there, each investor is sure to
find an appropriate mix of investment opportunities. You need only be concerned with spending the
appropriate amount of time and effort in finding, studying and deciding on the opportunities that match
your objectives.









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Investment Instruments are available investment options which any investor, big or small, may use
to store money as a safe deposit in an interest-paying account. Investors may also channel their
money into other financial assets with the hope of making extra money from such assets. There are
basic investment instruments, and others that are more complex. These include savings accounts,
certificates of deposit, stock investments, mutual funds, hedge funds and many others.


1. This is the most simple investment instrument available in the markets today. Most Americans have
a savings account. A savings account is an account established at a financial banking institution
which guarantees the depositor some kind of interest payment. This payment is often calculated on
an annual or bi-annual basis. The total interest payment earned on a savings account depends on
the offered interest rate and the total amount in the account. All savings accounts in the United
States are insured by the National Insurance Corporation of America.
2. Certificates of deposit, often referred to as CDs, are investment accounts established by financial
institutions such as banks for investment needs of individuals. Certificates of deposit pay
considerably higher interest payments compared to savings accounts. They come with insurance
provided by the National Insurance Depositors Corporation up to $100,000. One of the general
characteristics of CDs is that when you buy a CD, you hold it for a predetermined period of time in
order to earn the stated interest payment.

3. Stocks are investment    for persons interested in stocks. When companies go public, they roll
out stocks or shares after launching their Initial Public Offering (IPO). These are in line with the
Securities and Exchange (SEC) regulations for the stock markets. Once these stocks are registered,
they become available to investors. When you buy a stock, the company registers a stock certificate
in your name to cover your investment. You may sell your stocks at any time. Your stock market
investment may or may not earn you money. Stocks generally go up in value over time, but they may
also go down in value.
4. Mutual Funds are investment strategies run and managed by professional money managers. When
you buy a mutual fund, you get a share in the fund. Investment decisions are made by the mutual
fund manager. The investor has no input into such decisions. The mutual fund manager makes
investments into different assets such as stocks, bonds, commodities, hedge funds and so on. You
may sell your mutual fund at your disposal. Mutual funds are somewhat different from investing in
one stock because they are more diversified portfolios.
5. Hedge funds are advanced investment instruments for wealthy individuals. They are not available to
all investors. The Securities and Exchange Commission (SEC) regulates all hedge funds. Individuals
interested in hedge fund investments must be qualified under the SEC . Hedge funds are run
and managed by hedge fund managers. They use a combination if investment strategies for trading
purposes. Hedge fund managers may typically invest in stocks, bonds, derivatives, currencies,
options, futures, real estate or any other asset class the manager deem suitable for investment
purposes. Hedge fund managers charge two kinds of fees: annual fees and performances for their