What is an 'Investment'

An investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future.
In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create
wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future
or will be sold at a higher price for a profit.
BREAKING DOWN 'Investment'
The term "investment" can be used to refer to any mechanism used for the purpose of generating future income. In the
financial sense, this includes the purchase of bonds, stocks or real estate property. Additionally, the constructed building or
other facility used to produce goods can be seen as an investment. The production of goods required to produce other goods
may also be seen as investing.
Taking an action in the hopes of raising future revenue can also be an investment. Choosing to pursue additional education
can be considered an investment, as the goal is to increase knowledge and improve skills in the hopes of producing more
income.

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Major Characteristics of Investments

Certain features characterize all investments. The following are the main characteristics of investments:
1.Return: All investments are characterized by the expectation of a return. In fact, investments are made with the primary
objective of deriving a return. The return may be received in the form of yield plus capital appreciation. The difference
between the sale price & the purchase price is capital appreciation. The dividend or interest received from the investment is
the yield. Different types of investments promise different rates of return. The return from an investment depends upon the
nature of investment, the maturity period & a host of other factors.
2.Risk: Risk is inherent in any investment. The risk may relate to loss of capital, delay in repayment of capital, nonpayment
of interest, or variability of returns. While some investments like government securities & bank deposits are almost risk
less, others are more risky. The risk of an investment depends on the following factors.
The longer the maturity period, the longer is the risk.
The lower the credit worthiness of the borrower, the higher is the risk.
The risk varies with the nature of investment. Investments in ownership securities like equity shares carry higher risk
compared to investments in debt instrument like debentures & bonds.
3. Safety: The safety of an investment implies the certainty of return of capital without loss of money or time. Safety is
another features which an investors desire for his investments. Every investor expects to get back his capital on maturity
without loss & without delay.
4. Liquidity: An investment, which is easily saleable, or marketable without loss of money & without loss of time is said to
possess liquidity. Some investments like company deposits, bank deposits, P.O. deposits, NSC, NSS etc. are not marketable.
Some investment instrument like preference shares & debentures are marketable, but there are no buyers in many cases &
hence their liquidity is negligible. Equity shares of companies listed on stock exchanges are easily marketable through the
stock exchanges.
An investor generally prefers liquidity for his investment, safety of his funds, a good return with minimum risk or
minimization of risk & maximization of return.
https://www.mbaknol.com/investment-management/major-characteristics-of-investments/

objectives
Client's investment objectives are closely tied to their risk tolerance. Their appetite for risk is often a factor of the following:
Age
Marital status
Family responsibilities
Education
Investment experience
Typically, the older a client gets and the greater the number of people who rely on him or her for support, the more averse
he or she will be to risk. Offsetting that, education and market savvy tend to demystify some of the perceived risk in a
brokerage account and render the client more risk tolerant.

There are two important points to remember here:

First, the factors listed above change over time, so do not assume that someone who was writing uncovered calls last year
will want to play the zero-sum game of options speculation forever.
Second, as a registered representative, it will be your responsibility to provide your client with options that suit every stage
of life and corresponding risk tolerance level

Investment Objectives
There are four basic investment objectives:
preservation of capital,
current income,
current growth and
total return.
Preservation of Capital
Wealthy clients and those in the spending and gifting phases are most interested in preservation of capital. This is the most
conservative investment strategy, and it is intended solely to avoid risk of loss. Less risk, of course, means less return. Low-
yielding bonds and money market funds are the foundation of a capital preservation strategy.

Current Income
Conversely, current income is the strategy focused on getting returns on investment as quickly as possible. High-interest
bonds and high-dividend stocks are its mainstays.

Current Growth
The current growth strategy is intended for investors with time to "get in on the ground floor" of the "next big thing". As
risky as that sounds, it is not a bad strategy for someone who understands the potential downside.

Investing in any one growth stock is adventurous, but the idea is to collect an array of these emerging stocks - generally
shares of small companies in new businesses - in a portfolio. The expectation is that a couple of these investments will turn
out to be blockbusters, which will more than offset the ones that crash and burn. A growth stock generally does not offer a
dividend, and the entire payoff with this strategy is in selling it years from now for many multiples of what you paid for it
today.

Total Return
Total return investing factors in both capital appreciation - how fast the share price grows - and dividend yield. It also
considers the tax implications for the individual investor: a tax-free return of 5% is as good as a taxable dividend of 7% to
someone in the 40% bracket. Total return is sometimes called growth-with-income.

Just as clients do not necessarily fit into convenient investment phases, they tend not to have just one objective. Your goal
should be to blend all their objectives proportionately into their individual portfolios..

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The Principles of Investment

1.Know the risks
Investing your money can be a rewarding experience because of the risk involved in the process. Generally speaking, the
greater the risk, the greater the reward. However, an acceptable risk for one person may not be an acceptable risk for the
next. While investing your money may sound daunting, you dont have to manage your portfolio yourself as long as you
understand the risks behind investing your money, you can hire a portfolio manager to do the legwork for you.
2.Rules are important
If youre looking to manage your own portfolio, the greatest success tends to come when the investor sticks to a clear-cut
set of rules. Wishy-washy rules like A part of my investment should be real estate and Ill think about selling if the value
starts to drop arent good enough set specific values for how much of your portfolio should be a given investment and
set specific rules for when you want to sell.
However, because of the amount of time, knowledge and skill required to do this successfully, many people opt to use
a discretionary investment management company instead. Your portfolio manager will still follow a clear set of rules over
your investment mandate, though the individual buying and selling of investments will be done entirely at the portfolio
managers investment.
3.Set yourself realistic ROI goals
Everyone wants the highest possible ROI for the lowest possible risk. Unfortunately with minimal risk comes minimal
rewards, and vice versa. If youre looking for safe investments that guarantee a return of 12% or higher, youre going to be
disappointed those kind of investments simply dont exist. If you only want safe investments thats one thing, but dont
expect a massive ROI.
Set yourself objectives and a realistic time horizon before you start investing your money.
4.Know your financial limitations
There is a very real risk to investing more than you can afford. If you want to make the most of your investments, your
money shouldnt be keeping you up at night. Instead, it is far better to invest an amount each month which is appropriate to
your financial situation.
5.Its never too early to start investing
Because of the way that compound interest works, its never too early to start investing your money. You dont need to wait
until you have hundreds of thousands of pounds to hand before you start investing. Compound interest is a tremendously
powerful thing in many cases the sooner you start investing, the larger your overall profit. Feeding your investments little
by little can help your portfolio grow substantially over the years.
http://www.whatinvestment.co.uk/the-principles-of-investment-2502801/

Home
For Investors
Products & Professionals
Types of Investments
Think of the various types of investments as tools that can help you achieve your financial goals. Each broad investment
typefrom bank products to stocks and bondshas its own general set of features, risk factors and ways in which they can
be used by investors.
Learn more about the various types of investments below.

Bank Products
Banks and credit unions can provide a safe and convenient way to accumulate savingsand some banks offer services that
can help you manage your money. Checking and savings accounts offer liquidity and flexibility. Find out more about these
and other bank products.

Bonds
A bond is a loan an investor makes to an organization in exchange for interest payments over a specified term plus repayment
of principal at the bonds maturity date. Learn how corporate, muni, agency, Treasury and other types of bonds work.

Stocks
When you buy shares of a companys stock, you own a piece of that company. Stocks come in a wide variety, and they
often are described based the companys size, type, performance during market cycles and potential for short- and long-
term growth. Learn more about your choicesfrom penny-stocks to large caps and more.

Investment Funds
Fundssuch as mutual funds, closed-end funds and exchange-traded fundspool money from many investors and invest
it according to a specific investment strategy. Funds can offer diversification, professional management and a wide variety
of investment strategies and styles. But not all funds are the same. Understand how they work, and research fund fees and
expenses.

Annuities
An annuity is a contract between you and an insurance company, in which the company promises to make periodic
payments, either starting immediatelycalled an immediate annuityor at some future timea deferred annuity. Learn
about the different types of annuities.
Saving for College
Funding college begins with savings, starting with how much to save. Learn the many, smart ways to save for college,
including 529 College Savings Plans and Coverdell Education Savings Accounts. Well help you navigate your college
savings options.

Retirement
Numerous types of investments come into play when saving for retirement and managing income once you retire. For
saving, tax-advantaged retirement options such as a 401(k) or an IRA can be a smart choice. Managing retirement income
may require moving out of certain investments and into ones that are better suited to a retirement lifestyle.

Options
Options are contracts that give the purchaser the right, but not the obligation, to buy or sell a security, such as a stock or
exchange-traded fund, at a fixed price within a specific period of time. It pays to learn about different types of options,
trading strategies and the risks involved.

Commodity Futures
Commodity futures contracts are agreements to buy or sell a specific quantity of a commodity at a specified price on a
particular date in the future. Commodities include metals, oil, grains and animal products, as well as financial instruments
and currencies. With limited exceptions, trading in futures contracts must be executed on the floor of a commodity exchange.

Security Futures
Federal regulations permit trading in futures contracts on single stocks, also known as single stock futures, and certain
security indices. Learn more about security futures, how they differ from stock options and the risks they can pose.

Alternative and Complex Products

These products include notes with principal protection and high-yield bonds that have lower credit ratings and higher risk
of default than traditional investments, but offer more attractive rates of return. Learn about their features, risks and potential
advantages.

Insurance
Life insurance products come in various forms, including term life, whole life and universal life policies. There also are
variations on thesevariable life insurance and variable universal lifewhich are considered securities. See how insurance
products may fit into an overall financial plan.
http://www.finra.org/investors/types-investments

What is a 'Portfolio Investment'

A portfolio investment is a hands-off or passive investment of securities in a portfolio, and it is made with the expectation
of earning a return. This expected return is directly correlated with the investment's expected risk. Portfolio investment is
distinct from direct investment, which involves taking a sizable stake in a target company and possibly being involved with
its day-to-day management.
BREAKING DOWN 'Portfolio Investment'
Portfolio investments can span a wide range of asset classes such as stocks, government bonds, corporate bonds, Treasury
bills, real estate investment trusts (REITs), exchange-traded funds (ETFs), mutual funds and certificates of deposit.
Portfolio investments can also include options, derivatives such as warrants and futures, and physical investments such as
commodities, real estate, land and timber.
The composition of investments in a portfolio depends on a number of factors. Some of the most important include the
investors risk tolerance, investment horizon and amount invested. For a young investor with limited funds, mutual funds
or exchange-traded funds may be appropriate portfolio investments. For a high net worth individual, portfolio investments
may include stocks, bonds, commodities and rental properties.
Portfolio investments for the largest institutional investors such as pension funds and sovereign funds include a significant
proportion of infrastructure assets like bridges and toll roads. Portfolio investments for institutional investors generally need
to have very long lives so that the duration of their assets and liabilities match.
Impact of Risk Tolerance, Age and Time Horizon
The investments that are made in a portfolio are dependent on the investor's individual circumstances. Those with a greater
risk tolerance may favor investments in stocks, real estate, international securities and options, while more conservative
investors may opt for government bonds and the stocks of large well-known companies.
These risk preferences should also be weighed against the investor's goals and time horizon. A young person saving for
retirement may have 30 years or more to save but isn't comfortable with the risks of the stock market. This individual may
want to favor a more conservative mix of portfolio investments despite the long time horizon. Conversely, individuals with
high risk tolerances may want to avoid large allocations to riskier growth stocks if they are nearing retirement age. A
progression to a portfolio of more conservative investments is generally recommended as an investment goal nears.
Portfolio Investments for Retirement
Investors saving for retirement should focus on a diversified mix of low-cost investments for their portfolios. Index funds
have become popular in individual retirement accounts (IRAs) and 401(k) accounts due to their broad exposure to a number
of asset classes at a minimum expense level. These types of funds make ideal core holdings in retirement portfolios. Those
wishing to take a more hands-on approach may tweak portfolio allocations by adding additional asset classes such as real
estate, private equity and individual stocks and bonds to their portfolio mix.

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Investment Portfolio Definition

An investment portfolio is a collection of assets owned by an individual or by an institution.
An investor's portfolio can include real estate and so-called "hard" assets, such as gold bars. But most investment portfolios,
particularly portfolios that are assembled to pay for a retirement, are made up mainly of securities, such as stocks, bonds,
mutual funds, money market funds and exchange traded funds.
The best retirement portfolios diversify the mix of investments -- which can range from the caution of US Treasury bonds
to the risky zip of small-company stocks -- in an effort to dampen market losses and maximize potential gains.

http://www.moneycontrol.com/glossary/retirement-planning/investment-portfolio-definition_3806.html

8 Types of Investors Which One Are You?

Do you tend to invest in a particular way? Identifying which type of investor you are can help you understand the potential
pitfalls of your investment approach and how to improve your chances for better investment returns. Which type of
investor are you?
1. Automatic investor
The automatic investor is all about convenience. Everything related to investing is set on autopilot. Automatic contributions
to investment funds come out of every paycheck or are withdrawn from the bank account on a certain day of the month.
This type of investor doesn't spend much time or effort thinking about investing, and doesn't need to since everything is
automatic. They don't have to remind themselves to invest; it's checked off their financial to-do list.
The potential downside for the automatic investor is losing touch with where investment funds are going and how the
investment portfolio is performing. If you are not paying attention, you may not have investment selections that meet your
current goals, and you may not identify and remove low performing investments or funds with high fees. If you don't check
in at least occasionally, this hands-off approach may cost you. Rebalancing your portfolio once or twice a year by
transferring funds to maintain your desired proportions of stocks to bonds should be sufficient to keep your investment
portfolio on track. (See also: The Most Important Thing You're Probably Not Doing With Your Portfolio)
2. Daily Dow watcher
The Dow watcher is constantly up to speed. They know at any time if the stock market is up or down. The current market
price and chart is only a tap away on their smartphone. This type of investor knows how much their portfolio is worth and
worries about how much they are losing when the market has a bad day. Nothing goes over the Dow watcher's head.
The risk for the Dow watcher is that he or she can easily get stressed out by day-to-day ups and downs in the market. They
may even get discouraged when the market is going down and decide to sell stock when the price is low the worst time
to sell! It's good to be informed, especially when it comes to your investments, but if you find yourself too glued to the
Dow's daily performance it might be a good idea to step away from the news for a bit. Checking in on the stock market
and your investment portfolio quarterly is probably more than frequent enough, and you can use the time you save for
something more productive and enjoyable.
3. Active trader
The active trader is a studious investor. This type of investor tries to time the market by figuring out that a stock is going up
before other investors realize it and then selling when it is near the peak price before most investors figure out that it is
going down. This type of investor pores over market and economic data, reads business articles, and is well-informed about
business trends and news. He or she is willing to take risks for a chance at big returns.
If you're an active trader, tread carefully; you can easily lose significant money if your timing is off. Trading fees can also
get expensive if your investment approach requires making a lot of trades. You are much more likely to make money from
buying good stocks and holding them for the long haul.
4. Conscientious investor
Conscientious investors put their money where their morals are. They have limits to what activities and products they are
willing to be involved with in order to make a buck. For example, some conscientious investors invest only in socially-
responsible or environmentally-responsible companies, and avoid owning shares in companies that promote values or
products contrary to their moral principles. This type of investor is likely to exert economic influence through consumer
purchasing decisions as well as through their stock picks.
This type of ethical investing unfortunately can limit a person's investment options, which may result in lower returns. But
some things are worth more than money to conscientious investors. (See also: A Simple Guide to Socially Responsible
Investing)
5. Property investor
Not every investor owns stocks. The property investor owns real estate, collectibles, gold, and maybe even bonds. He or
she wants to invest in things that they can understand and control to some extent. This type of investor may not trust Wall
Street and avoids the volatility of stocks.
Historically, however, stocks have had great investment returns compared to other investment types, so property investors
who shy away from the stock market could be missing out. Large cap value stocks can be a relatively safe way to start off
in stock investing for first-time stock investors.
6. Bargain investor
This is the kind of investor that pounced on GM stock when it was $1 per share in 2009. Of course there is risk that bargain
stocks could become worthless, but there is potential for the stock price to bounce back. The bargain investor looks carefully
at P/E ratios to check the share price relative to earnings per share when deciding what stock to buy.
Bargain hunters should be wary though sometimes stocks with low prices are trading at a low price for a good reason.
The bigger the bargain, the more research is merited into why the price is so low before you buy.
7. Company loyalist
The company loyalist owns a disproportionate amount of stock from an individual company. This could be a trendy stock
that inspires loyalty like Apple or Tesla, or the company loyalist could own a large amount of his or her own employer's
stock.
Owning a large amount of any single company stock can be risky. The company could experience a major scandal or product
failure and the stock price could tank. Remember Enron? Owning a lot of stock in the company you work for is even riskier,
because if something goes wrong you'll not only lose value in your stock fund, but you may lose your job at the same time.
Some financial advisers suggest that owning more than 10 percent to 15 percent of your company's stock may be too much.
8. Portfolio tweaker
The portfolio tweaker is not really an active trader, but likes to adjust and fine tune his or her portfolio frequently by making
transfers between funds to get the desired balance between large cap, mid cap, small cap, foreign, domestic, growth, value,
and bond investment categories.
While it is good to adjust your portfolio occasionally to meet your investment goals, frequently selling investments that are
performing well just to meet an arbitrary "balance" in your portfolio may not be the best move and could hurt your overall
return. As we advised the automatic investor, portfolio rebalancing once or twice per year is a good interval for most
investors.
http://www.wisebread.com/8-types-of-investors-which-one-are-you