No matter how much we detested multiplication in school, it is definitely one operation that we would like to apply to our money. This could be done either through saving or investing. Considering that there are various ways in which an investor can see his money grow, one dilemma that investors always face, is whether he is parking his money in the right spot or not. In this section, we try to familiarize investors to different investment avenues.
All of us earn so that we can spend what we earn on things that we need and things that we desire. Saving refers to the surplus of earnings over spending. This surplus could be kept away for spending on a later date or could be spent now. It is in the former sense that we associate with the word.
Borrowing refers to spending more now, with the Belief of earning more later so that the borrowed sum could be paid back. While saving is safe, borrowing is riskier.
Investing on the other hand, means to gather funds with an estimate of future consumption, so that greater returns could be earned. The funds required for investing could be either the surplus of spending or could be gained by cutting our present consumption.
Speculating is akin to gambling. A speculator puts his money in instruments with an aim of making profits from the fluctuation of the prices of the instruments. It's short-term oriented with a high amount of risk.
Money - market securities: short-term securities with maturities of one year or less.
Debt securities: fixed income securities with maturities of greater than one year.
Equity securities: long-term securities that do not mature.
Derivative securities: securities that derive their value from other securities and involve transactions that are completed at a future date.Non-financial investments - these include real estate, precious metals, collectibles and other physical resources.
These include real estate, precious metals, collectibles and other physical resources.