Different Financial Investment Terms Finance Essay

Published: 2021-06-26 21:40:05
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In financial term investment is a mean to purchase financial products. or other products for future return. In other words investments mean utilization of money for generating more money in business. The acquisition of physical inventory in the Expectation for further expansion of business .However, risk element for the loss of principal amount cannot be ignored.
Making investment decision in mutual fund, Govt Bonds, real estate necessary knowledge/information of various venues of investment should be knowned.The best investment may be selected on the basis of reasonable rate of return and prospects of capital growth with low level of risk. While making decision to minimize risk, investment may be in different sectors.
If investors want to invest or purchase company investments then he must get information regarding different company performance, by studying company Balance sheet, income statement. By studying these all information about the company investor will know about company’s financial position. By investing in Strong position company then investors will get high return.
Money Investment:
It requires nature of finance available and goals set. The decision may be based on high rate of return with growth prospects and low risk.
VENUES OF INVESTMENT:
There are various venues of investors for investment of their savings. It may be invested in mutual fund, stocks,bonds,real estate, gold and commodities
.
MUTUAL FUNDS:
A m mutual fund is a pool of money where investors deposit their saving and get the advantage of experienced management, diversified portfolio and convenient processing.
The fund is managed by Professional Managers who invest the fund in a wide selection of shares and /or securities, like Term Finance Certificates, Modarbah investment, and other non interest bearing securities. The assets created through the investors’ contribution to the pool are divided in to units, the value of which reflects the performance of the investment portfolio. At the end of financial year the income of the fund is distributed among all unit holders.
THE BENIT OF POOLES RESOURCES
IT is a fact that over the long term, the return on investment through equity investment it’s far higher than any other form of investment whether Fixed Income, foreign Currency, or Real estate.
The risk associated with mutual fund is less than the risk involved in direct investment in stock market.
Investors enjoy the benefit of diversified portfolio of investment.
TYPES OF MUTUAL FUNDS:
OPEN -ENDED:
A) Size of capital:
No limitation over the investment amount.
B) Unit Price:
Its unit based on NET ASSET VALUE
C) Can be purchases:
It can purchases from authorized distribution Channel/both
D) Redemption responds possibility:
Management is legally responsible to repurchase its issued units.
E) Listing at the Stock Exchange:
It may be listed or not, no legal restriction Stock exchange.
CLOSE – ENDED:
SIZE OF CAPITAL:
Usually the investment amount is "FIXED"
B) UNIT PRICE:
It is unit price is based on "MARKET VALUE"
CAN BE PURCHASE:
It can be purchases from stock market.
Redemption respond possibility:
BONDS:
A bond is a debt security in which an issuer owes the bond holder a debt and is supposed to repay the principle and the interest at a later date.
Bonds are loan which may be long term or short term depending upon its maturity .Bonds is issued by companies and government when needs money for its operation.
Companies and government issued bond when they need money for their day to day operations. And company / issuer will pay interest to band holder/lender in future.
These are low risk instrument.
LONG TERM :
It may be for over year. Its principal and interest is paid at a certain interval.
SHORT TERM:
These loan is extended for a year and principle and interest is paid in year.
TYPES OF BONDS:
Treasury bonds
Treasury bills
Municipal Bond.
Corporate Bond.
Secure Bond.
Unsecured Bond.
TREASURY BONDS:
These bonds aye issued by Federal GOVt to fiancé the budget deficient. these bonds are long term. these bonds maturity level is more than 10 yrs.
TREASURY BILLS:
These bonds are also issued by Federal Govt to fiancé the budget deficient.Thier maturity level is up to ten years.
MUNCIPAL BONDS:
These are issued by Local govt or state. The investors like these bonds because these are free Tax interest bonds.
CORPORATE BOND:
These bonds are similar to Treasury bonds and Treasury Notes but Corporate bonds are issued by corporate.
In Corporate bonds the interest rate is high and risk is also high. And Return is also high.
Secure bond.
These bonds are backed by real assets. In this bond the investors may guarantee or mortgage to investors. If the issuers are failing to pay, the investors may take the control over the mortgage.
A mortgage-backed bond is a example of secure bond. If the issuers are fail to pay then investor sold the collateral to recover all value of bond.
These bonds are low risk and secure bond. These are on 1st priority. If issuer fail to pay the return..
UNSECURE BOND:
These bond which is not backed by any collateral. These bonds are having high risk and high return. In the unsecured bond investors loans money without collateral. For This unsecured bonds carries high risk for investors, which in turn makes loan more expensive. the more additional risk that investors must take on, the higher the rate of return a borrowers must pay.
STOCK
STOCK is that kind of security which is issued in the form of shares which represent ownership interests in a company.
There are two types of stock:
1.Preferred stock
2. common stock.
PREFERRED STOCK:
Stock holders do not have power for voting for choosing directors.
They are the real owners of business.
1ST priority in the case of dividend.
In case of Liquidation 1st payment made to them.
Dividends rate is fixed.
In case of loss of company then profit is 1st given to preferred stock
COMMON STOCK:
They have power for voting for broad of directors.
They are the real owners of business.
2nd priority in the case of dividend distribution.
2nd priority to common stock.
Dividend rate is not fixed.
If company liquidifies then
1st priority to secure bond
2nd priority to unsecured bond.
3rd priority to Preferred stock.
4th priority is to Common stock.
Shares
Share is a unit account for different financial instrument like
Stocks.
Mutual fund.
Limited partnership.
REIT’s
Share is a document issued by company or it can be purchased from the stock market.
For the purchase of share u will get the portion of the company’s and by selling the share you will get capital gain.
From share one can get dividend+ capital gain. On the other hand there is also risk factor of capital loss if you sold the share at a price below your buying price.
The share transaction is carried out through licenses members call brokers. Brokers are the listed members of stock exchange. They are working on the behalf of company or share holders. Through these brokers trading of shares take place.
Investing in gold, silver
Gold is another way of investment. These investing is done through ownership or by means of shares and certificate. From investing in gold we will get high return. Gold investment is less risky than stock market. Investment is silver are similar to those in gold.

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