Investments are placements of capital in certain activities that can be commercial or civil, in order to achieve an economic return. Anyone who has some money can invest and seek with this, obtain greater long-term profits. The investment will be satisfactory if the following elements are met: profitability, time and risk.
Profitability reflects the value that is expected to receive, because of the amount of capital and the type of business. This indicator is measured based on interest rates, which seeks the highest possible value.
The time refers to the estimated period in which said investment is recovered, that is, the period it will take to return the invested capital.
Risk is perhaps one of the most relevant elements, since it takes into consideration the probability of obtaining a result contrary to expectations.
So the perfect combination of these three elements defines what would be an ideal investment:
satisfaction in expected profitability, short payback period and minimal risk.
There are three types of investments depending on the time required: those made in the long term, medium term and short term.
Long-term investments: are those that are projected to give future profitability to the invested capital. Its objective is to increase the initial capital in a few years; With this investment it is not expected to obtain immediate benefits. Eg: investments in bonds, mutual funds, and stocks.
Medium-term investments: are those planned for those who do not want to wait so long to achieve benefits, but do not want it immediately either. Through these investments the person will be able to obtain results in the future, but much closer, for example, currency trading.
Short-term investments: are those that offer benefits, in short periods of time. These investments are considered the most effective to get money. Example, negotiable documents (bills of exchange, promissory notes…), certificates of deposits, etc.
Financial investments can be of different kinds:
Investments in bonds: a bond is a debt security; where the issuer seeks to raise funds to cover its needs, guaranteeing the buyer the return of their money, plus their interests. In short, it consists of lending your money to a company or government entity and in which the government agrees to cancel the money by paying a specific amount in interest.
Of all the known financial instruments, bonds are the safest investment option since at the time of acquiring them, the investor is informed of how much the bond pays and how often it will pay interest, whether it is monthly, quarterly, semi-annually or annually..
Investment in shares: shares represent a savings and investment instrument, as well as being the title deed to the assets of a company. Therefore, each time a person or organization buys a share, they become the owner of a fraction of the company; In other words, the more shares are held in the company, the greater will be the participation, both in profits and in decision-making.
As an investment, shares are acquired in certain companies, with the confidence that said company will perform well, which would produce an increase in the value of the shares, which can then be sold at a profit.
Investing in exchange-traded funds: This is a class of investment that is handled in the stock market, just like a stock. These function, on the one hand, as investment funds and on the other, as listed shares. Its objective is oriented to reproduce a certain stock index.
Forex market investment: this type of investment specializes in the exchange of currencies between investors from all over the world; and consists of the purchase and sale of foreign currencies, achieving a favorable differential between them.
Futures and options investment: represents a hedging instrument that allows the person who uses it to secure the value of their assets at a later time. The investment in futures consists of a purchase agreement where the contracting parties are obliged to buy or sell an asset at a future date, but with a previously established price. The investment in options is an agreement between two parties, where one of them acquires over the other the right and not the obligation, to buy or sell to him in the future, a specific quantity of an asset at a previously stipulated price.
Money market investment: money markets are those where short-term assets are traded, generally these markets are informal, so they are not regulated and where most of their transactions are made through the internet, telephone, etc.
These markets are classified into: short-term credit markets and securities market.
