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Investment and The Investment Process

Investments provide either income, increased value, or both. Returns come in two forms: income from interest or dividends, and increased value if the asset price rises. Investments are defined by providing added income, increased value over time, or both. Organizations offer various investment attributes to attract investors, including the type of asset (securities like stocks and bonds or property), level of involvement (direct or indirect), claim type (debt, equity, derivatives), risk level (low or high), and investment period (short or long term). The optimal investment depends on an individual's resources, goals, and risk tolerance.

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83 views2 pages

Investment and The Investment Process

Investments provide either income, increased value, or both. Returns come in two forms: income from interest or dividends, and increased value if the asset price rises. Investments are defined by providing added income, increased value over time, or both. Organizations offer various investment attributes to attract investors, including the type of asset (securities like stocks and bonds or property), level of involvement (direct or indirect), claim type (debt, equity, derivatives), risk level (low or high), and investment period (short or long term). The optimal investment depends on an individual's resources, goals, and risk tolerance.

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Jihan Abigail -
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Subject: Summary of Chapter 1 (The Investment Environment)

Group: 8
-, Jihan Abigail
-, Rose DelmaTitania
Abuno, Marselino Laudewik Markus
Monareh, Chelsea Sandra
Rumate, Imanuel Brandon Hengky Leonardo
Parallel: D

Investment and the Investment Process

Investment is simply any asset into which funds can be placed in hope that one will gain
positive income and/or have the fund increased in value. Returns are the rewards one gain
from investing. It comes in two basic forms:
1. Income
Example: Money invested in a savings account provides income in the form of
periodic interest payments.
2. Increased value
Example: While a share of common stocks provides income in the form of dividends,
investors also buy stocks with the expectation that its price will rise, thus increasing
its value.
We can identify any investment with a test of definition. Does it provide added income?
Does its value increase over time? If not, then it is not classified as an investment.

Attributes of Investment
As demanders of funds, organizations compete for the use of our funds. In their effort of
attempting to raise funds from investors amongst fierce competition, organizations offer a
wide variety of investment with different attributes. The investment you choose will depend
on your resources, your goals, and your willingness to take risks. The following attributes
distinguish one type of investment from another:
1. Securities or Property
- Securities: investments issued by firms, governments, or other organizations that
represent a financial claim on the resources of the issuer. Common types include
stocks and bonds.
- Property: consists of investments in real property or tangible personal property.
Real property refers to land, buildings, and that which is permanently affixed to
the land. Tangible personal property includes items such as gold, artwork,
antiques, and other collectibles.
2. Direct or Indirect
- Direct investment: an investment in which an investor directly acquires a claim
on a security or property.
- Indirect Investment: an investment in a collection of securities or properties
managed by a professional investor.
3. Debt, Equity, or Derivative Securities
- Debt: a loan that obligates the borrower to make periodic interest payments and
to repay the full amount of the loan by some future date.
- Equity: an ongoing ownershipin a business or a property. The most common type
is common stock.
- Derivative Securities: an investment that is neither debt nor equity, that instead
derive their value from an underlying security or asset. Example: stock options
4. Low- or High- Risk Investments
Investment also differ on the basis of risk. Risk is a reflection of the uncertainty
surrounding the return that will be generated from a particular investment.
Investors face a tradeoff between risk and return (high risk, high return; low risk, low
return).
- Low-Risk Investment provide a relatively predictable return, but also relatively,
low return.
High
5. Short- or Long-Term investments
6. Domestic or Foreign

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