Investment Is Putting Money Into Something With The Expectation of Profit

Investment is putting money into something with the expectation 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, dividends, or appreciation of
the value of the instrument (capital gains).[1] It is related to saving or deferring consumption.
Investment is involved in many areas of the economy, such as business management and finance
whether 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.[2]
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 finance, an option is a derivative financial instrument that establishes a contract between two
parties concerning the buying or selling of an asset at a reference price. The buyer of the option
gains the right, but not the obligation, to engage in some specific transaction on the asset, while
the seller incurs the obligation to fulfill the transaction if so requested by the buyer. The price of
an option derives from the difference between the reference price and the value of the underlying
asset (commonly a stock, a bond, a currency or a futures contract) plus a premium based on the
time remaining until the expiration of the option. Other types of options exist, and options can in
principle be created for any type of valuable asset.
An option which conveys the right to buy something is called a call; an option which conveys
the right to sell is called a put. The reference price at which the underlying may be traded is
called the strike price or exercise price. The process of activating an option and thereby trading
the underlying at the agreed-upon price is referred to as exercising it. Most options have an
expiration date. If the option is not exercised by the expiration date, it becomes void and
worthless.
In return for granting the option, called writing the option, the originator of the option collects a
payment, the premium, from the buyer. The writer of an option must make good on delivering
(or receiving) the underlying asset or its cash equivalent, if the option is exercised.
An option can usually be sold by its original buyer to another party. Many options are created in
standardized form and traded on an anonymous options exchange among the general public,
while other over-the-counter options are customized ad hoc to the desires of the buyer, usually
by an investment bank.[1][2]

Investment Is Putting Money Into Something With The Expectation of Profit

Uploaded by

Copyright:

Available Formats

Investment Is Putting Money Into Something With The Expectation of Profit

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Investment Is Putting Money Into Something With The Expectation of Profit

Uploaded by

Copyright:

Available Formats

Investment is putting money into something with the expectation of profit.

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

You might also like