To invest is not only to put cash into an investment with the hope of a return/profit at some point in the near future. Simply put, to invest simply means possessing an asset or something with the intention of making a profit from the increase in value of that asset over a pre-determined period of time or an appreciating value of that asset over time. Usually, when people think of investment, they think of purchasing something such as a car, a home, the stock market, bonds, or real estate property. There are other types of investments besides these mentioned however.
Real estate investment is one of the safest investments available today because of the wide range of available properties, from single family houses to condominiums and town homes. These investments come with varying risks depending on the type of real estate you purchase. One of the most stable investments for middle class individuals and families is commercial properties such as apartment buildings, office buildings, and retail stores. These investments also have the advantage of appreciating greatly in value since most real estate properties are bought and resold.
An asset is generally considered to be an investment when the initial cost exceeds the current market value of that asset. For example, if a person were to purchase a single family house for the cost of a used car then over the course of five years that person would have made back his investment and he would still have a lower cost car. However, this example illustrates the risk involved in an investment as well. Higher priced items will generally appreciate more rapidly than lower priced items. This is why the real estate market is so lucrative for the individual investor.
Bond investing is the process of borrowing money and investing it in stocks, bonds, or mutual funds. A bond is usually secured by an economic commodity such as cash or government securities. Most bond funds earn a return of only one percent, which means that the return on the bond is not significant. However, the convenience and lower risk associated with bond investing make it a popular choice for many investors. These types of bonds typically pay lower interest rates and have longer terms than traditional stocks or mutual funds.
Investing in shares is a popular method of investment for most investors. Shares are similar to bonds because they are usually secured by a particular economic commodity such as gold, oil, or silver. The advantage to shares is that the price can fluctuate widely from day to day. In addition, the investor can choose to sell shares of stock at any time without waiting until the company’s outstanding stock has reached a certain price. However, shares also carry some risk as well.
Another type of real estate investment strategy is to purchase small portions of company shares or other assets. An investor can purchase shares of business assets such as truck parks, office buildings, apartments, and condos, as well as land. Small parcels of land, unlike commercial properties, may not be purchased for investment purposes unless they are in a region with high growth potential. For this reason, investors often seek out areas that are undergoing rapid development or new construction.
Real estate investment also allows investors to gain rental income. Typically, individuals invest in real estate by purchasing property that is under-utilized or surplus. For example, a single family home may be left unoccupied for long periods of time due to low vacancy rates. A home that is in constant use may attract tenants who use the dwelling on a regular basis. Aided by improvements, these renters will likely pay rental income until the property owner decides to sell.
Other methods of private equity include creating investment funds consisting of stocks, bonds, or mutual funds. Hedge funds are also popular choices for many investors. Hedge funds combine a number of strategies, many of which are used in stock markets. One of these strategies, however, is commodity trading, which is becoming more popular for hedge fund investors. Some of these investments are known as alternative investments, which are not as closely monitored as conventional stocks and bonds.