What Is An Investment? Essay

806 words - 4 pages

There are so many different investment strategies, investment options, investment jargon, and investment ideas, that a novice investor can become confused and discouraged before ever getting started. Before an individual can delve into beginner investing strategies, I think it’s important to define what an investment really is and the benefits of investing properly and strategically.

An investment is any vehicle into which funds can be placed with the expectation that it will generate positive income and/or preserve or increase its value. With this definition in mind, it’s important to find the best investment that will generate positive income (or hold its value) and that involves a ...view middle of the document...

Mutual funds provide diversification for investors. Diversification is important when it comes to investing. It simply means that you’re not putting all of your eggs in one basket, but investing in different instruments, therefore reducing your risks. Not all mutual funds are alike, so it’s important to research the stocks and bonds the mutual funds are invested in, the historical performance of mutual funds, and the fees that are associated with the funds.

Options are instruments that give an investor the option to buy or sell the underlying investment that the option is attached to at a given price. Generally, options are considered investment tools for savvy investors and are not recommended for beginner investing strategies. However, once an investor gains more investing experience, options are certainly instruments that are worth learning about and possibly implementing into an investment portfolio.

Futures are also not recommended for the novice investor. Futures are legally binding obligations that require the seller of the contract to make delivery and the buyer of the contract will receive the delivery of assets at a given time and date. Futures are generally used for hedging purposes, which is a strategy used to reduce risks.

Another investment besides securities is property investments. This includes real property (buildings and land) and tangible property (gold, antiques, artwork, and other collectibles). Real estate has become popular investments in recent years and the potential for...

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