What Are Investments?

 


All over social media, when looking into the financial section, there is always talks about investing or specific investments. The sudden urge to go in blind can attack anyone, but do not fall prey to it. Investments have their risks too, but if you fully understand what you are investing into - then it can work in your favor. 

Research

Investment is defined as:

  • "the outlay of money usually for income or profit : capital outlay" (Marriamwebster) 
    • Outlay is defined as: "... an expenditure we make to support an activity. It is the total cost of achieving an objective, acquiring something, or carrying out a decision. Put simply; it is the amount of money we spend on something." (marketbusinessnews)
      • Short version: The amount you spent off of achieving an objective, in some cases results in acquiring something.
    • Capital outlay is defined as: "...refers to the sum of money spent by the company to invest in the purchase of the capital assets such as plants, machinery, property, equipment or for extending the life of its existing assets with the motive of increasing the production capacity of the company." (Wallstreetmojo)


Investment Examples

  • Stocks
    • "...a type of investment that represents an ownership share in a company." (NerdWallet) 
      • Ex. Share of AAPL (Apple Inc.)
  • Bonds
    • "... issued by governments and corporations when they want to raise money. By buying a bond, you're giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way, usually twice a year." (Vangaurd.com)
      • Short version: A loan you give to a user, with periodic interest installments, and the loan is paid back in full on a specific date
        • Ex. Corporate bonds ( "These tend to offer higher interest rates than other types of bonds, but the companies that issue them are more likely to default than government entities." (Motley))
  • Index Funds
    • " a type of mutual fund whose holdings match or track a particular market index." (NerdWallet)
      • Short version: The amount invested is distributed in all the companies that are within that specific index, diversifying your portfolio
        • S&P 500 Index
  • ETF's
    • "... a collection of hundreds or thousands of stocks or bonds, managed by experts, in a single fund that trades on major stock exchanges" (Vanguard.com)

  • Certification of Deposit (CD)
    • "...is a type of savings account with a fixed interest rate that’s usually higher than a regular savings account. It also has a fixed term length and a fixed date of withdrawal, known as the maturity date. You lock funds in a CD for a term generally ranging from three months to five years." (NerdWallet)
    • "...Like regular savings accounts, certificates of deposit are insured, so you get your money back in the unlikely event your bank goes bankrupt. CDs at banks are insured by the Federal Deposit Insurance Corp" (NerdWallet)
      • Ex.  SPDR S&P 500 (SPY)
  • Real-estate (Property)
    • Property that is either passive or active income, property that the investor buys

Summary

Having knowledge of what investments you are looking into makes a world of difference. Having rushed into the Stock Market, there are some trades that have cost me. Now that I am working towards living a wealthy life, having knowledge of different investments will benefit me and others who are working towards the same goal. 

There also needs to be an understanding of the risk that you, personally, will be taking on from that investment. 




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