Investing your money is actually taking the hours you’ve worked and stored and giving them to someone else to use and pay you back in the future with more money (labour hours). There are different levels of risk and return for your investment and usually the greater the risk the greater the possible return.
Types of Investment:
– Real Estate
– Mortgages secured against real estate
– Corporate Bonds
– Stocks (Blue Chip)
– Stocks (speculative penny)
– Direct Investment in business (private equity)
Types of Returns:
– Interest Payment. Usually associated with loans and other forms of debt financing. Can also be found as part of a debt-equity financing structure, such as convertible debentures.
– Equity Appreciation (or preservation). This is when the value of the investment instrument increases due to the appreciation in value of the underlying venture. Appreciation in value can arise from debt reduction, risk reduction, increase in cash flow, increase in profitability, improvement in competitive position, and increase in market share.
– Dividends. A payment issued by the company in which the investment is made. Preferred shares often pay pre-set amount based on a percentage of purchase price of shares or as a percentage of profit. Common shares often also pay dividends, such as in the case of banks which are known for their reliability in continuous dividend payments.
– Fringe Benefits. These includes, among other considerations, having a say in the decisions of a corporation that impacts our society through how it conducts business in relation to society’s needs, the environment, social responsibility, etc.
Types of Risks: