Investment
Investment can encompass a wide range of activities. This term can include investments in certificates of deposit, bonds, common stocks, or mutual funds. Although professional investors may also use other assets such as purchase certificates, stock options, and tangible assets such as gold and precious objects for investment purposes. Investment can involve varying degrees of risk, and individuals, whether educated or not, can make investment decisions based on their own circumstances.
The word “Investment”
Investment refers to the conversion of financial assets into one or more types of assets that are held for period in the future, and it is considered an essential component of wealth management for investors. This wealth includes the total current income and the present value of future incomes, and thus the present value and concept of compound interest can have a significant impact on this process.
The goal of investors is generally to grow and develop their capital and benefit from its returns in the future. They typically aim to hold onto their capital for extended periods , spanning years and decades, and derive profits from it. However, investment can have different interpretations in various contexts. For example, in the economics of organizations, it includes the creation and provision of fi capital and/or increasing capital in organizations, with the expectation of business progress and higher profits. The larger the capital of an organization, the better it can expand its activities and ultimately achieve higher profits and income.
Investment in Economics
In economics, investment refers to the purchase of a good that is not currently being used but will be needed by an individual in the future and that good will generate profit for the individual.
Investment in Financial Science
Investment refers to the acquisition of a financial asset such as stocks with the anticipation that the asset will generate profits in the future and its price will increase, allowing for selling at a higher price and realizing a substantial gain.
Concept of Capital and Investment
All financial and monetary resources, as well as convertible resources, are referred to as capital. Societies and organizations that generally have more capital tend to perform better and have better activities compared to their competitors with less capital. Nowadays, human resources are also considered part of capital.
Capital can be either cash or non-cash. Cash capital refers to cash money, while non-cash capital includes several types of assets owned by individuals. However, capital is different from money and has its own distinctions. Money is only cash that is always available and can be exchanged quickly, but capital has a longer lifespan and is used for wealth creation through investment. For example, brands, drug formulations, inventions, which can create wealth through their methods, are considered a type of capital.
Types of Investments
Investments are categorized into two main groups: real and financial, based on their nature. Real investments are those in which an individual gets a tangible asset by sacrificing present value. In fact, the subject of investment is a real asset. Buying a property or an apartment is a prominent example of real investment.
In financial investments, an individual gets a financial asset by sacrificing present value, which results in a cash flow. Investing in securities such as common stocks or participation certificates, where an individual receives a cash flow in the form of profit in return for paying money, is considered a financial investment.
- Real estate: Buying a house, apartment, land, etc. for the purpose of generating income or increasing capital can be considered a type of real investment. This income can be obtained from renting the property or selling it at a higher price than the purchase rate.
- Physical commodities: Buying gold, silver, jewelry, or any valuable commodity that can be bought and sold again can be considered a type of real investment.
- Stocks: Buying stocks of companies in the stock market for the purpose of generating income and increasing capital is considered a financial investment. The risk of investing in the stock market is extremely high, and those who have knowledge of it can engage in activities in this market and earn higher returns compared to other assets by managing risk.
- Bonds: Bonds are issued by governments to supply the necessary financial budget for the implementation of company and national plans, and they are usually guaranteed and issued by the government. Since the repayment of the principal and interest of these bonds is guaranteed by the government, they are considered low-risk securities. Bonds have common characteristics such as maturity date, nominal value, nominal interest rate, and selling price. Participation certificates and sukuk are two major types of bonds in the market.
Bank Deposit
A bank deposit is a low-risk investment that is offered by banks and is of a long-term nature. It can have different interest rates in different accounts and time periods. Due to its low risk, this investment will have a lower return compared to other available options in the market.
Investment Funds
A bank deposit is a low-risk investment that is offered by banks and is of a long-term nature. It can have different.
An investment fund is one of the methods of investing in the capital market. Funds are financial intermediaries that pool funds from the public and invest them in securities, providing individuals with benefits from the resulting profits.
- Fixed Income Investment Fund: These funds consist of a combination of different financial assets such as equity securities, bank deposits, treasury bills, and low-risk investments, and they have cash liquidity and dividend payments to investors within a specified time.
- Equity Investment Fund: These funds give a specific percentage of their asset composition to stocks of listed companies and the rest to equity securities, thus having a higher risk compared to fixed income funds and the possibility of higher returns.
- Mixed Investment Fund: These types of funds give their assets approximately equally between stocks and fixed income securities. The allocation between stocks and fixed income securities in mixed investment funds may change over time, but usually, the proportion of stocks is at least 40% and at most 60%, with the rest consisting of fixed income securities. These funds have lower risk compared to equity funds and potentially higher returns compared to fixed income funds.
- Exchange-Traded Funds (ETFs): These funds hold various assets such as stocks and securities and are traded on stock exchanges like stocks. Unlike mutual funds where the Net Asset Value (NAV) per unit is calculated and used as the basis for buying and selling at the end of each day, ETFs can be traded throughout the day like stocks.
interest rates in different accounts and time periods. Due to its minimal risk, this investment will have a lower return compared to other available options in the market.
Investment Proposal and Financial Plan
Before any individual decides to invest, they should prepare a comprehensive financial plan. This plan should include decision-making about the investment. Additionally, ownership, asset lifespan, and profitability should also be taken into consideration.
Finally, the plan should include the smallest required amount of savings. Furthermore, the concept of best diversification is crucial since individuals’ wealth, maintained in different assets, needs to be assessed and managed as a unit. Wealth should be managed and evaluated in the form of a portfolio. A portfolio consists of a set of investments made by an investor.
The professional and experienced team of the Spud Gene Trading Department guarantees strategic and high-yield investments with the lowest amount of risk and danger for those interested in investing in the pharmaceutical industry. Additionally, we are ready to invest in new and innovative projects.