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Investing
Loans
Mortgages
Mutual Funds
Real Estate
Reviews
Savings
Stocks
More...
Why should you invest?
Stocks
Mutual funds
Insurance
More real estate
Taking control of your personal expenses is the first step to taking control
of your personal finances. However, if you seek to build wealth over the mid
term, then control over your personal expenses is not enough. Control over
your financial expenses puts you in the driver's seat, but if you are to grow
your savings then you need to invest.
Investment is the process whereby a sum of money is placed into a
business venture, portfolio or opportunity with the objective of securing a
positive return. If the investment is good then returns could be substantial.
One of the most common forms of investment is an ordinary savings bank
account. The account holder typically agrees to keep a minimum balance
in the account and in exchange for this the bank pays a certain amount of
interest. Most banks also offer fixed deposit accounts on which they pay
significantly higher interest rates than on an ordinary savings account. The
catch however tends to be that you cannot readily withdraw money from that
account until the agreed term for the deposit.
Even then the returns on your investment in most savings accounts are
relatively low nowadays averaging under 3% per annum. Clearly, while you
will gain by ordinary savings in a bank, if you seek significant returns on
your investment you may wish to consider other possibilities, including:
stocks, mutual funds, insurance and real estate.
of your personal finances. However, if you seek to build wealth over the mid
term, then control over your personal expenses is not enough. Control over
your financial expenses puts you in the driver's seat, but if you are to grow
your savings then you need to invest.
Investment is the process whereby a sum of money is placed into a
business venture, portfolio or opportunity with the objective of securing a
positive return. If the investment is good then returns could be substantial.
One of the most common forms of investment is an ordinary savings bank
account. The account holder typically agrees to keep a minimum balance
in the account and in exchange for this the bank pays a certain amount of
interest. Most banks also offer fixed deposit accounts on which they pay
significantly higher interest rates than on an ordinary savings account. The
catch however tends to be that you cannot readily withdraw money from that
account until the agreed term for the deposit.
Even then the returns on your investment in most savings accounts are
relatively low nowadays averaging under 3% per annum. Clearly, while you
will gain by ordinary savings in a bank, if you seek significant returns on
your investment you may wish to consider other possibilities, including:
stocks, mutual funds, insurance and real estate.
A stock may be defined as capital raised by a firm or corporation through
the issuing of shares. Holders in turn are entitled to an ownership or
interest (equity) in the firm or corporation.
One stocks have been purchased in a firm, the holder potentially
positions himself to reap capital gains. If a significantly large enough
number of shares of the company has been bought by one holder, that
holder may assume a controlling interest in the firm.
Valuation of the stock for a firm depends largely upon expectations. A firm
may initially price its stock at $1 per share at the start of its financial year.
During the course of that year it may hire a highly reputable CEO with a
known performance record, causing the market to expect its performance
to beat projections. This would likely result in an appreciation of the value
of the firm's stock. Alternatively, the firm may have made an important
discovery using some advanced technology that will confer upon it some
degree of monopoly advantage relative to its competition. This too would
result in appreciation of the firms share value.
However, the extent to which a firm's share value appreciates on a
particular day of trading depends on the market forces of demand and
supply. If market forces attach a great value to the innovation in the firm,
then it is likely that investors will dynamically bid for the stocks until its
price is such that the market clears. Conversely, a firm in which there is
little innovation or market forces expect it to under-perform for any reason
may witness its stocks losing value, sometimes significantly in any one
day of trading.
Given the dynamics of the stock market and the uncertainties of the
direction of trade, it is always advisable to retain a stockbroker to manage
your portfolios. Alternatively, there are computer programs that can be
used to simulate the likely direction for some stocks.
the issuing of shares. Holders in turn are entitled to an ownership or
interest (equity) in the firm or corporation.
One stocks have been purchased in a firm, the holder potentially
positions himself to reap capital gains. If a significantly large enough
number of shares of the company has been bought by one holder, that
holder may assume a controlling interest in the firm.
Valuation of the stock for a firm depends largely upon expectations. A firm
may initially price its stock at $1 per share at the start of its financial year.
During the course of that year it may hire a highly reputable CEO with a
known performance record, causing the market to expect its performance
to beat projections. This would likely result in an appreciation of the value
of the firm's stock. Alternatively, the firm may have made an important
discovery using some advanced technology that will confer upon it some
degree of monopoly advantage relative to its competition. This too would
result in appreciation of the firms share value.
However, the extent to which a firm's share value appreciates on a
particular day of trading depends on the market forces of demand and
supply. If market forces attach a great value to the innovation in the firm,
then it is likely that investors will dynamically bid for the stocks until its
price is such that the market clears. Conversely, a firm in which there is
little innovation or market forces expect it to under-perform for any reason
may witness its stocks losing value, sometimes significantly in any one
day of trading.
Given the dynamics of the stock market and the uncertainties of the
direction of trade, it is always advisable to retain a stockbroker to manage
your portfolios. Alternatively, there are computer programs that can be
used to simulate the likely direction for some stocks.
Finance Consulting Inc.
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If you are new to investment in stocks, then you may wish to consider
mutual funds instead of individual stocks in companies. A mutual fund
is defined as an investment instrument that sells shares to a large
group of investors. The resulting fund uses investors capital to
purchase securities such as stocks or bonds. A mutual fund can
comprise the investment interests of thousands of investors.
With mutual funds it is the combined performance of the various
investment instruments in the fund's portfolio that determines the value
of shares in the fund. In this way, an under-performing share in one firm
can be counter-balanced by a well-performing share of another firm.
Investors participate in a diversified portfolio of investment instruments
which divests risk.
Of course, it is advisable to choose your mutual fund carefully given that
there has been some mishaps in the past, when some of these funds
allowed hedge funds to trade shares after hours. It is also likely that
these companies have learnt a lesson as they were ultimately made to
concede lower profits in order to preserve shareholder value.
mutual funds instead of individual stocks in companies. A mutual fund
is defined as an investment instrument that sells shares to a large
group of investors. The resulting fund uses investors capital to
purchase securities such as stocks or bonds. A mutual fund can
comprise the investment interests of thousands of investors.
With mutual funds it is the combined performance of the various
investment instruments in the fund's portfolio that determines the value
of shares in the fund. In this way, an under-performing share in one firm
can be counter-balanced by a well-performing share of another firm.
Investors participate in a diversified portfolio of investment instruments
which divests risk.
Of course, it is advisable to choose your mutual fund carefully given that
there has been some mishaps in the past, when some of these funds
allowed hedge funds to trade shares after hours. It is also likely that
these companies have learnt a lesson as they were ultimately made to
concede lower profits in order to preserve shareholder value.
Insurance is not ordinarily seen as an investment as it is an expense
against the possibility of a future risk. The risk may or may not materialize
and so many individuals are reluctant to invest in insurance.
But, the sensible way to understand insurance is the protection of the
assets that have been created against future risk. If the replacement cost
of losing an asset is negligible then it may make little sense to insure it.
However, if the replacement cost is significant then there is every
incentive to seek insurance.
Insurance is typically advisable for a range of assets from the human
capital asset - life and medical insurance, to automobiles, homes and
their contents. The extent to which you take insurance cover should
depend on your specific needs. However, taking control of your personal
finances includes protection of your vital assets from unforeseen
disasters and that's where insurance comes in.
against the possibility of a future risk. The risk may or may not materialize
and so many individuals are reluctant to invest in insurance.
But, the sensible way to understand insurance is the protection of the
assets that have been created against future risk. If the replacement cost
of losing an asset is negligible then it may make little sense to insure it.
However, if the replacement cost is significant then there is every
incentive to seek insurance.
Insurance is typically advisable for a range of assets from the human
capital asset - life and medical insurance, to automobiles, homes and
their contents. The extent to which you take insurance cover should
depend on your specific needs. However, taking control of your personal
finances includes protection of your vital assets from unforeseen
disasters and that's where insurance comes in.
We have discussed the importance of investment in real estate in more
detail in our real estate page. Suffice to mention here that investment in
real estate is the single most important investment you can undertake in
pursuing your goals of financial freedom.
History has shown time an again that investment in immovable property
is always prudent. Even when an economy may be in recession
properties tend to hold their value and in any event, would normally be
the last investments to be given up. Stocks and other financial
instruments tend to be more volatile than real estate, hence the reason
why most millionaires in America are significant real estate owners.
detail in our real estate page. Suffice to mention here that investment in
real estate is the single most important investment you can undertake in
pursuing your goals of financial freedom.
History has shown time an again that investment in immovable property
is always prudent. Even when an economy may be in recession
properties tend to hold their value and in any event, would normally be
the last investments to be given up. Stocks and other financial
instruments tend to be more volatile than real estate, hence the reason
why most millionaires in America are significant real estate owners.
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