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Investing
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People invest in various investment instruments depending on their investment goals, expected return and risk tolerance.

People who are risk takers invest in risky investments which may have a high return such as shares of company stocks. People who are risk averse and the elderly may prefer less risky investments which will not lose value although they may have low return on investment ROI. These are usually government bonds which are guaranteed by the government. The investor redeems the interest coupons semi-annually and receives the money invested at the maturity date. Treasury bills are short-term. The investor buys the T-Bills which have a par value or face value which is more than what the investor pays. The difference is the profit and it is received on the maturity date. Banks, pension schemes and other financial institutions issue bonds which are bought through a stock broker. The investor pays the stockbroker a fee or commission.

There are many investment instruments. People invest in savings accounts and bank deposits which they expect will earn them a profit in terms of interest earned. There are people who invest in shares of listed companies known as stocks. They expect the company to make a profit which will be distributed to them as dividends. They can sell shares at higher prices than the buying price and realize capital gains. Stocks change hands several times in a day and one can monitor the prices by checking online or in financial newspapers.
 
Investing in mutual funds is what many people know as investing. Mutual funds are very popular because they diversify the investment portfolio by trading in different investments which have varying returns and also risks. People invest in real estate. Buying a home is an investment. The mortgage interest paid on a home is tax deductible encouraging people to own their own residential homes. Other people buy second homes which they lease out and receive rent as an income while others buy residential and commercial properties as an investment either to lease out or re-sell at a profit.

If you have limited resources and you want to know where you can invest it, there are many things you can do with your money.

- Invest in education. The knowledge and skills you gain can take you far. You can be promoted or you can get a better job
- Invest in a small business which you are passionate about. Sell cakes, candy, ice-cream, start a boutique, a restaurant etc.
- Buy a taxi or a boat and lease it out
- Visit you stock broker and buy stocks. Diversify and manage your portfolio but if you do not have that time or knowledge invest in a mutual fund
- The rich invest in hedge-funds which are managed like mutual funds but are not regulated
- Invest more money in retirement schemes which earn money

There are many individuals who invest in liquid marketable securities which are short-term investments which can be converted to cash.

Last modified onTuesday, 02 April 2013 23:36
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