“An Investment in Knowledge pays the Best Interest.”
– Benjamin Franklin
This article is exclusive dedicated to the people who want to learn everything about Investment. From the Meaning of Investment to the Types of Investments, this post has it all. Read it to the end and you’ll be clear about all the basics you need to know about the term ‘Investment’.
At this point of time, keeping your money in a bank account won’t help you to grow your money, even sometimes it will be helpless for you to beat inflation with interest provided on a savings account.
You can opt for Investment as a Full-time career or use it as a passive source of income. Before starting an investment you must know the investment types. We have covered a few of the popular investment types for helping you to start your investment journey.
But before you want to invest your money you have to earn it. So, don’t forget to check out our post on 👉 Top 10 Ways to Earn Money Online.
Meaning of Investment and Types of Investment
Meaning of Investment is purchasing an asset or item with a goal of generating income, generally, by gaining interest on money or by an increase in prices of that asset. In other words, Investment is a mechanism in which you land your money to an organization or a person with an aim of gaining interest on it.
How do Investments work?
Investment is a mechanism that will give you a return on your money in the future or its value will increase with time. In other words, the goal of buying this finical product or Investment is that its value will increase with time. This is how Investments works.
Types of Investment
We have covered the Meaning of Investment, Now let’s move on with Types of Investment.
There are many types of Investment you can choose from. According to the amount of investment or on the basis of time, liquidity, and a lot more, you can filter them according to your need.
Types of Investment on the basis of time:-
Short-Term Investment (3 months – 12 months)
Medium-Term Investment (1 year – 5 years)
Long-Term Investment (5 years – 10 years)
Basic Types of Investment –
- Shares – Meaning of Shares
- Bonds – Meaning of Bonds
- Cash Equivalents – Meaning of Cash Equivalents
- Investment Bank – Meaning of Investment Bank
Meaning of Shares/Stocks – Shares is the company’s part that is offered to the public for sale, with the purpose of raising funds for paying off debts, Expansion, or as a working capital fund. Shares usually involve higher risk, if you purchase a share of a well-known company then they will be highly liquid in nature because when you will be willing to sell your shares there will be enough buyers. Share market requires knowledge to analyze, like – how to identify the quality of share, basic knowledge about accounting terms, how to read the company’s balance sheet, etc. In beginning, this will be more than enough for you to start your journey and you will learn new things over time.
Meaning of Bonds – Bonds is a fixed interest instrument that is represented as a loan for the company, government, or any other organization which is raised for a specific purpose like expansion or paying off debts of higher interest rates. Usually, the duration of a bond is an approximate measure of a bond’s price sensitivity to changes in interest rates. Bonds involve very low risk as comparing any other type of investment because at the time of bankruptcy or windup bonds are paid off just after bank loans, so it involves lesser risk.
Meaning of cash equivalents – Cash Equivalent is a type of investment that are Low in risk, Highly liquid, Short Termed with Low return. Investing in cash equivalent will be a great choice for those who want their investment to be highly liquid with very low risk for a short period of time (around 3 months) and sadly low ROI (Return On Investment).
It is called Cash Equivalent for a reason, it is considered as liquid as Cash in hand, that is the reason it is called Cash Equivalent. Because it represents its liquidity. It is better to put your money in Cash Equivalent investment than putting in a savings account, it provides a higher interest rate than a savings account. You can easily buy them from Banks, Cooperation, or from Government.
Meaning of Investment Bank – Investment bank is an Institution that helps individuals or organizations raise capital and provide financial consultancy services to them. Investment banks help to raise funds for companies, governments, and other organizations which requires a huge amount for the Expansion or Acquisition. It is considered one of the most complex financial mechanisms in the world. For more information visit Investopedia.
Having a good investment plan will surely help you to land a lot of money to keep your pocket full and thick in long run.
Investment is a must thing to grow your money and beat inflation.
In this article we have covered the Meaning of Investment – Investment is purchasing an asset or item with the goal of generating income. Types of Investment Shares, Bonds, Cash Equlivant, and Investment Banking.
We hope now you know the basic terms of Investment. Do comment below what type of Investment is most convenient for you. We would love to know!
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