Concepts of Investment

Becoming an investor carries the highest amount of cashflow. It is all about allowing your money work for you even though you may not be physically present. For business owners, self employed and employees that are likely to become investors, this article is just for you. So sit back and browse through the topic before taking a drive into that world. Here is everything you need to know in investment so that you can make the right financial decisions

What is investment?

Investment is an asset that is brought for the purpose of reselling it at a much higher rate across a space of time so that it will yield income periodically e.gs can be rents and dividends. This wealth is then used in fulfilling various objectives while making your financial life robust.

Investments can also be known as an asset that is acquired so that over time, there is an increase in value.

There are basically three categories of investment

1. Lending

You behave like a financial organization if you begin to invest in lending commodities. Bonds owned by governments, owned by corporate companies are examples of this category of investment. Another example is the savings accounts. The money you store there is like a loan to the bank. They are used by the bank to make profits because it serves as loans to customers.

2. Ownership

This kind of assets are bought and becomes the investors property. Examples include real estate, shares, stocks and so on.

3. Cash Equivalent

These are liquid commodities that can be exchanged for money. An example of this kind is money market. They offer low returns in investments but their risk are almost not counted.

Types of investments

The following are different types of investments:

1. Stocks: This involves buying and owning shares of a company which in turn gives you dividends

2. Mutual funds: Mutual funds comprises of money taken from investors and put in shares and bonds of a company, then are supervised by fund managers.

3. Bonds: This involves money lended to an organization in which a specific interest is recieved at a given interval. It also involves the face value of such money on maturity.

4. Cryptocurrencies: cryptocurrencies are known as money that is completely virtual, stored in your smart phones or PC through a "wallet app" and is transferrable from one individual to another. Here, you buy coins at a fixed price while you watch the money equivalent of the coins rise over a period of time for you to resell and make profits

5. Public Provident Fund: This is a savings plan offered by the government that helps you invest your money over a specific period of time. It also enables for returns on investments.

How to invest

Now that we've seen "what investment is", "the categories and types of investment", it is vital that we understand how to invest. Here are some few tips you should know before you invest

1. Financial needs analysis

Analyze your financial risk capacity with respect to your investment choice. Factors like family size and life goals should also be considered with respect to your investment choice.

2. Diversification of investments

Learning how to put your funds on different platforms will help regulate and maintain the balance between return and risk.

3. Time period

We have the long term and short term investment. You have to know the duration on each financial decisions so that you can make wise financial plans.

4. Periodical assessment

Some funds have up's and down. Market fluctuations are inevitable, therefore constant and periodic assessment is needed. You must also consider readjustment if there are not good returns.

5. Compound interest

Here, your capital grows as your interest is earned. Your money accumulates over time from the benefits of compound interest. I'll like to suggest that you start investing early.

Reasons you should start investing

1. It helps you to earn a steady stream of income

2. To help your money grow

3. It reduces the burden of taxation

4. It helps to keep your money safe

5. Your retirement plans are secured.

6. You finally meet your financial goals.

Financial intelligence does not require too much IQ. The wealthiest men in the world today are not the most educated men. It is therefore important that you understand these few basic concepts before you proceed.