What is investments?

Life is full of investments. For instance, our parents send us to school; pay our school bills until we are fully matured where we can cater for ourselves. Our parents believe that when we grow up we will be productive—give back to the society even more than they spent on us.

Investment is basically putting resources (money, valuable items) into something with the hope of reaping more than you invested. The profit you gain from investment is called returns. Some investment yield higher returns whilst others yield lower return or even negative returns.

Real asset and financial asset

Investments are normally made in assets. There are two types of asset, namely real asset and Financial asset. Real assets are assets that are used in production. Examples are machines, plants and equipments. Monetary asset are claims on real assets. That is, it gives the holder the right to own real asset. Examples of monetary assets are banker’s acceptance, certificate of deposit, stocks, bond etc

Long term and short term investment

There are two types of investment instruments; they are long term and short term investment securities. Long term investments instruments include stocks and bonds. These instruments mature more than 1 year and above. Short term instruments are also called money market instruments. They mature within a short period, usually a year. Examples include banker’s acceptance, certificate of deposit,91 day Treasury Bill, 180 days Treasury Bill etc.

Next blog: types of bonds and stocks