Of all the precious metals, gold is the most popular as an investment.[1] Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is subject to speculation and volatility as are other markets.

Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economic regions or countries, until recent times. Many European countries implemented gold standards in the latter part of the 19th century until these were temporarily suspended in the financial crises involving World War I.[2] After World War II, the Bretton Woods system pegged the United States dollar to gold at a rate of US$35 per troy ounce. The system existed until the 1971 Nixon Shock, when the US unilaterally suspended the direct convertibility of the United States dollar to gold and made the transition to a fiat currency system. The last currency to be divorced from gold was the Swiss Franc in 2000.[citation needed].

Since 1919 the most common benchmark for the price of gold has been the London gold fixing, a twice-daily telephone meeting of representatives from five bullion-trading firms of the London bullion market. Furthermore, gold is traded continuously throughout the world based on the intra-day spot price, derived from over-the-counter gold-trading markets around the world (code "XAU"). The following table sets forth the gold price versus various assets and key statistics on the basis of data taken with the frequency of five years:[3]

Like most commodities, the price of gold is driven by supply and demand including demand for speculation. However unlike most other commodities, saving and disposal plays a larger role in affecting its price than its consumption. Most of the gold ever mined still exists in accessible form, such as bullion and mass-produced jewelry, with little value over its fine weight and is thus potentially able to come back onto the gold market for the right price.[10][11] At the end of 2006, it was estimated that all the gold ever mined totalled 158,000 tonnes (156,000 long tons; 174,000 short tons).[12] The investor Warren Buffett has said that the total amount of gold in the world that is above-ground, could fit into a cube with sides of just 20 metres (66ft).[13] However estimates for the amount of gold that exists today vary significantly and some have suggested the cube could be a lot smaller or larger.[by whom?]

Given the huge quantity of gold stored above-ground compared to the annual production, the price of gold is mainly affected by changes in sentiment (demand), rather than changes in annual production (supply).[14] According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,500 tonnes.[15] About 2,000 tonnes goes into jewelry or industrial/dental production, and around 500 tonnes goes to retail investors and exchange traded gold funds.[15]

Central banks and the International Monetary Fund play an important role in the gold price. At the end of 2004 central banks and official organizations held 19 percent of all above-ground gold as official gold reserves.[16] The ten-year Washington Agreement on Gold (WAG), which dates from September 1999, limits gold sales by its members (Europe, United States, Japan, Australia, Bank for International Settlements and the International Monetary Fund) to less than 500 tonnes a year.[17] European central banks, such as the Bank of England and Swiss National Bank, were key sellers of gold over this period.[18] In 2009, this agreement was extended for a further five years, but with a smaller annual sales limit of 400 tonnes.[19]

Although central banks do not generally announce gold purchases in advance, some, such as Russia, have expressed interest in growing their gold reserves again as of late 2005.[20] In early 2006, China, which only holds 1.3% of its reserves in gold,[21] announced that it was looking for ways to improve the returns on its official reserves. Some bulls hope that this signals that China might reposition more of its holdings into gold in line with other Central Banks. Chinese investors began pursuing investment in gold as an alternative to investment in the Euro after the beginning of the Eurozone crisis in 2011. It has since become the worlds top gold consumer as of 2013.[22] India has recently purchased over 200 tons of gold which has led to a surge in prices.[23]

It is generally accepted that the price of gold is closely related to interest rates. As interest rates rise the general tendency is for the gold price, which earns no interest, to fall, and as interest rates dip, for gold price to rise. As a result, gold price can be closely correlated to central banks via the monetary policy decisions made by them related to interest rates. For example if market signals indicate the possibility of prolonged inflation, central banks may decide to enact policies such as a hike in interest rates that could affect the price of gold in order to quell the inflation. An opposite reaction to this general principle can be seen after the European Central bank raised its interest rate on April 7, 2011 for the first time since 2008.[24] The price of gold responded with a muted response and then drove higher to hit new highs one day later.[25] A similar situation happened in India: In August 2011 when the interest rate were at their highest in two years, the gold prices peaked as well.[26]

It has in fact been found that the price of gold can be influenced by a number of macroeconomic variables.[27] Such variables include the price of oil, the use of quantitative easing, currency exchange rate movements and returns on equity markets.[27]

Gold, like all precious metals, may be used as a hedge against inflation, deflation or currency devaluation. As Joe Foster, portfolio manager of the New York-based Van Eck International Gold Fund, explained in September 2010:

The currencies of all the major countries are under severe pressure because of massive government deficits. The more money that is pumped into these economies the printing of money basically then the less valuable the currencies become.[30]

close to fair value (on 10 October 2014)[31]

Jewelry consistently accounts for over two-thirds of annual gold demand. India is the largest consumer in volume terms, accounting for 27% of demand in 2009, followed by China and the USA.[32]

Industrial, dental and medical uses account for around 12% of gold demand. Gold has high thermal and electrical conductivity properties, along with a high resistance to corrosion and bacterial colonization. Jewelry and industrial demand has fluctuated over the past few years due to the steady expansion in emerging markets of middle classes aspiring to Western lifestyles, offset by the financial crisis of 20072010.[33]

In recent years the amount of second-hand jewelry being recycled has become a multi-billion dollar industry. The term "Cash for Gold" refers to a service for people to earn cash by selling their old, broken, or mismatched gold jewelry to local and online gold buyers. There are many websites that offer these services.

However, there are many companies that have been caught taking advantage of their customers, paying a fraction of what the gold or silver is really worth, leading to distrust in many companies.[34]

When dollars were fully convertible into gold via the gold standard, both were regarded as money. However, most people preferred to carry around paper banknotes rather than the somewhat heavier and less divisible gold coins. If people feared their bank would fail, a bank run might result. This happened in the USA during the Great Depression of the 1930s, leading President Roosevelt to impose a national emergency and issue Executive Order 6102 outlawing the "hoarding" of gold by US citizens. There was only one prosecution under the order, and in that case the order was ruled invalid by federal judge John M. Woolsey, on the technical grounds that the order was signed by the President, not the Secretary of the Treasury as required.[35]

The most traditional way of investing in gold is by buying bullion gold bars. In some countries, like Canada, Austria, Liechtenstein and Switzerland, these can easily be bought or sold at the major banks. Alternatively, there are bullion dealers that provide the same service. Bars are available in various sizes. For example in Europe, Good Delivery bars are approximately 400 troy ounces (12kg).[36] 1 kilogram (32ozt) are also popular, although many other weights exist, such as the 10oz, 1oz, 10g, 100g, 1kg, 1Tael, and 1Tola.

Bars generally carry lower price premiums than gold bullion coins. However larger bars carry an increased risk of forgery due to their less stringent parameters for appearance. While bullion coins can be easily weighed and measured against known values to confirm their veracity, most bars cannot, and gold buyers often have bars re-assayed. Larger bars also have a greater volume in which to create a partial forgery using a tungsten-filled cavity, which may not be revealed by an assay.

Good delivery bars that are held within the London bullion market (LBMA) system each have a verifiable chain of custody, beginning with the refiner and assayer, and continuing through storage in LBMA recognized vaults. Bars within the LBMA system can be bought and sold easily. If a bar is removed from the vaults and stored outside of the chain of integrity, for example stored at home or in a private vault, it will have to be re-assayed before it can be returned to the LBMA chain. This process is described under the LBMA's "Good Delivery Rules".[37]

The LBMA "traceable chain of custody" includes refiners as well as vaults. Both have to meet their strict guidelines. Bullion products from these trusted refiners are traded at face value by LBMA members without assay testing. By buying bullion from an LBMA member dealer and storing it in an LBMA recognized vault, customers avoid the need of re-assaying or the inconvenience in time and expense it would cost.[38] However this is not 100% sure, for example, Venezuela moved its gold because of the political risk for them, and as the past shows, even in countries considered as democratic and stable, for example in the USA in the 1930s gold was seized by the government and legal moving was banned.[39]

Efforts to combat gold bar counterfeiting include kinebars which employ a unique holographic technology and are manufactured by the Argor-Heraeus refinery in Switzerland.

Gold coins are a common way of owning gold. Bullion coins are priced according to their fine weight, plus a small premium based on supply and demand (as opposed to numismatic gold coins which are priced mainly by supply and demand based on rarity and condition).

The sizes of bullion coins range from one-tenth of an ounce to two ounces, with the one-ounce size being most popular and readily available.[40]

The Krugerrand is the most widely held gold bullion coin, with 46million troy ounces (1,400 tonnes) in circulation. Other common gold bullion coins include the Australian Gold Nugget (Kangaroo), Austrian Philharmoniker (Philharmonic), Austrian 100 Corona, Canadian Gold Maple Leaf, Chinese Gold Panda, Malaysian Kijang Emas, French Napoleon or Louis d'Or, Mexican Gold 50 Peso, British Sovereign, American Gold Eagle, and American Buffalo.

Coins may be purchased from a variety of dealers both large and small. Fake gold coins are common and are usually made of gold-plated lead.

Gold rounds look exactly like gold coins but they have no currency value. They range in similar sizes as gold coins and come in 0.05 troy ounce all the way up to 1 troy ounce. Unlike gold coins, gold rounds have no additional metals added to them for durability purposes and do not have to be made by a government mint, which allows the gold rounds to have a lower overhead price as compared to gold coins. On the other hand, gold rounds are not as collectible as gold coins.

Gold exchange-traded products may include exchange-traded funds (ETFs), exchange-traded notes (ETNs), and closed-end funds (CEFs) which are traded like shares on the major stock exchanges. The first gold ETF, Gold Bullion Securities (ticker symbol "GOLD"), was launched in March 2003 on the Australian Stock Exchange, and originally represented exactly 0.1 troy ounces (3.1g) of gold. As of November 2010, SPDR Gold Shares is the second-largest exchange-traded fund in the world by market capitalization.[41]

Gold Exchange-traded products (ETPs) represent an easy way to gain exposure to the gold price, without the inconvenience of storing physical bars. However exchange-traded gold instruments, even those which hold physical gold for the benefit of the investor, carry risks beyond those inherent in the precious metal itself. For example the most popular gold ETP (GLD) has been widely criticized, and even compared with mortgage-backed securities, due to features of its complex structure.[42][43][44][45][46]

Typically a small commission is charged for trading in gold ETPs and a small annual storage fee is charged. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time.

Exchange-traded funds, or ETFs, are investment companies that are legally classified as open-end companies or unit investment trusts (UITs), but that differ from traditional open-end companies and UITs.[47] The main differences are that ETFs do not sell directly to investors and they issue their shares in what are called "Creation Units" (large blocks such as blocks of 50,000 shares). Also, the Creation Units may not be purchased with cash but a basket of securities that mirrors the ETF's portfolio. Usually, the Creation Units are split up and re-sold on a secondary market.

ETF shares can be sold in basically two ways. The investors can sell the individual shares to other investors, or they can sell the Creation Units back to the ETF. In addition, ETFs generally redeem Creation Units by giving investors the securities that comprise the portfolio instead of cash. Because of the limited redeemability of ETF shares, ETFs are not considered to be and may not call themselves mutual funds.[47]

Gold certificates allow gold investors to avoid the risks and costs associated with the transfer and storage of physical bullion (such as theft, large bid-offer spread, and metallurgical assay costs) by taking on a different set of risks and costs associated with the certificate itself (such as commissions, storage fees, and various types of credit risk).

Banks may issue gold certificates for gold which is allocated (fully reserved) or unallocated (pooled). Unallocated gold certificates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuing bank's gold on deposit. Allocated gold certificates should be correlated with specific numbered bars, although it is difficult to determine whether a bank is improperly allocating a single bar to more than one party.[48]

The first paper bank notes were gold certificates. They were first issued in the 17th century when they were used by goldsmiths in England and the Netherlands for customers who kept deposits of gold bullion in their vault for safe-keeping. Two centuries later, the gold certificates began being issued in the United States when the US Treasury issued such certificates that could be exchanged for gold. The United States Government first authorized the use of the gold certificates in 1863. On April 5, 1933 the US Government restricted the private gold ownership in the United States and therefore, the gold certificates stopped circulating as money (this restriction was reversed on January 1, 1975). Nowadays, gold certificates are still issued by gold pool programs in Australia and the United States, as well as by banks in Germany, Switzerland and Vietnam.[49]

Many types of gold "accounts" are available. Different accounts impose varying types of intermediation between the client and their gold. One of the most important differences between accounts is whether the gold is held on an allocated (fully reserved) or unallocated (pooled) basis. Unallocated gold accounts are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuer's gold on deposit. Another major difference is the strength of the account holder's claim on the gold, in the event that the account administrator faces gold-denominated liabilities (due to a short or naked short position in gold for example), asset forfeiture, or bankruptcy.

Many banks offer gold accounts where gold can be instantly bought or sold just like any foreign currency on a fractional reserve basis.[citation needed]Swiss banks offer similar service on a fully allocated basis. Pool accounts, such as those offered by some providers, facilitate highly liquid but unallocated claims on gold owned by the company. Digital gold currency systems operate like pool accounts and additionally allow the direct transfer of fungible gold between members of the service. Other operators, by contrast, allows clients to create a bailment on allocated (non-fungible) gold, which becomes the legal property of the buyer.

Other platforms provide a marketplace where physical gold is allocated to the buyer at the point of sale, and becomes their legal property.[citation needed] These providers are merely custodians of client bullion, which does not appear on their balance sheet.

Typically, bullion banks only deal in quantities of 1000 ounces or more in either allocated or unallocated accounts. For private investors, vaulted gold offers private individuals to obtain ownership in professionally vaulted gold starting from minimum investment requirements of several thousand U.S.-dollars or denominations as low as one gram.

Derivatives, such as gold forwards, futures and options, currently trade on various exchanges around the world and over-the-counter (OTC) directly in the private market. In the U.S., gold futures are primarily traded on the New York Commodities Exchange (COMEX) and Euronext.liffe. In India, gold futures are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).[50]

As of 2009 holders of COMEX gold futures have experienced problems taking delivery of their metal. Along with chronic delivery delays, some investors have received delivery of bars not matching their contract in serial number and weight. The delays cannot be easily explained by slow warehouse movements, as the daily reports of these movements show little activity. Because of these problems, there are concerns that COMEX may not have the gold inventory to back its existing warehouse receipts.[51]

Outside the US, a number of firms provide trading on the price of gold via contract for differences (CFDs) or allow spread bets on the price of gold.

Instead of buying gold itself, investors can buy the companies that produce the gold as shares in gold mining companies. If the gold price rises, the profits of the gold mining company could be expected to rise and the worth of the company will rise and presumably the share price will also rise. However, there are many factors to take into account and it is not always the case that a share price will rise when the gold price increases. Mines are commercial enterprises and subject to problems such as flooding, subsidence and structural failure, as well as mismanagement, negative publicity, nationalization, theft and corruption. Such factors can lower the share prices of mining companies.

The price of gold bullion is volatile, but unhedged gold shares and funds are regarded as even higher risk and even more volatile. This additional volatility is due to the inherent leverage in the mining sector. For example, if one owns a share in a gold mine where the costs of production are $300 per ounce and the price of gold is $600, the mine's profit margin will be $300. A 10% increase in the gold price to $660 per ounce will push that margin up to $360, which represents a 20% increase in the mine's profitability, and possibly a 20% increase in the share price. Furthermore, at higher prices, more ounces of gold become economically viable to mine, enabling companies to add to their production. Conversely, share movements also amplify falls in the gold price. For example, a 10% fall in the gold price to $540 will decrease that margin to $240, which represents a 20% fall in the mine's profitability, and possibly a 20% decrease in the share price.

To reduce this volatility, some gold mining companies hedge the gold price up to 18 months in advance. This provides the mining company and investors with less exposure to short-term gold price fluctuations, but reduces returns when the gold price is rising.

Investors using fundamental analysis analyze the macroeconomic situation, which includes international economic indicators, such as GDP growth rates, inflation, interest rates, productivity and energy prices. They would also analyze the yearly global gold supply versus demand.

The performance of gold bullion is often compared to stocks due to their fundamental differences. Gold is regarded by some as a store of value (without growth) whereas stocks are regarded as a return on value (i.e., growth from anticipated real price increase plus dividends). Stocks and bonds perform best in a stable political climate with strong property rights and little turmoil. The attached graph shows the value of Dow Jones Industrial Average divided by the price of an ounce of gold. Since 1800, stocks have consistently gained value in comparison to gold in part because of the stability of the American political system.[52] This appreciation has been cyclical with long periods of stock outperformance followed by long periods of gold outperformance. The Dow Industrials bottomed out a ratio of 1:1 with gold during 1980 (the end of the 1970s bear market) and proceeded to post gains throughout the 1980s and 1990s.[53] The gold price peak of 1980 also coincided with the Soviet Union's invasion of Afghanistan and the threat of the global expansion of communism. The ratio peaked on January 14, 2000 a value of 41.3 and has fallen sharply since.

One argument follows that in the long-term, gold's high volatility when compared to stocks and bonds, means that gold does not hold its value compared to stocks and bonds:[54]

As with stocks, gold investors may base their investment decision partly on, or solely on, technical analysis. Typically, this involves analyzing chart patterns, moving averages, market trends and/or the economic cycle in order to speculate on the future price.

Bullish investors may choose to leverage their position by borrowing money against their existing assets and then purchasing gold on account with the loaned funds. Leverage is also an integral part of buying gold derivatives and unhedged gold mining company shares (see gold mining companies). Leverage or derivatives may increase investment gains but also increases the corresponding risk of capital loss if/when the trend reverses.

Some of the economic mechanics of gold have been compared to those of cryptocurrencies. For example, they are both scarce, fungible and do not come attached to debt. Nick Szabo created a digital currency call 'bit gold' that mimicked some features of gold.[55]

Some cryptocurrencies and services are backed by gold.[56]

Gold maintains a special position in the market with many tax regimes. For example, in the European Union the trading of recognised gold coins and bullion products are free of VAT. Silver and other precious metals or commodities do not have the same allowance. Other taxes such as capital gains tax may also apply for individuals depending on their tax residency. U.S. citizens may be taxed on their gold profits at 15, 23, 28 or 35 percent, depending on the investment vehicle used.[57]

Gold attracts a fair share of fraudulent activity. Some of the most common to be aware of are:

See the rest here:
Gold as an investment - Wikipedia, the free encyclopedia

Top Story

Facebook made Zuckerberg a multibillionaire. Who else 35 and youngermakes the list? Read more

Bad behavior by the stock market is inevitable. Here's how to brace for a wild ride.Read more

Don't let investing fees eat up your gains. Beware these costs that can shrink your return.Read more

Each has pros and cons. Learn the trade-offs in selecting ETFs versus mutual funds.Read more

Before you let an adviser manage your hard-earned money, be sure to check these things.Read more

These funds can protect your portfolio from rising interest rates or currency variations.Read more

These funds -- which hold a basket of investments -- trade like stocks, but are they right for everyone?Read more

Each has pros and cons. Learn the trade-offs in selecting ETFs versus mutual funds.Read more

Robo-advisers certainly are cheaper than human advisers. Are they better?Read more

It takes guts to invest more when the stock market falls, but it's often a smart move.Read more

Wall Street can be scary when investing for retirement. Here are ways to lower the risk.Read more

Mortgage rates are so low that a cash-out refinance can boost your 401(k). Here's how.Read more

Bad behavior by the stock market is inevitable. Here's how to brace for a wild ride.Read more

Read the original:
Investment, Mutual Funds, ETFs & Stocks | Bankrate.com

Fundamental Analysis

Although its growth rate was mediocre in the past, the Philippines is slowly yet steadily emerging as a rising ...

Savings

Find out about some of the most profitable available alternatives to depositing money in a traditional bank passbook ...

Savings

Tourists have many choices about where to exchange their money in Honolulu. Here are the best places to get a fair ...

Professionals

In the world of 401(k) investment lineups, more is not always better. Here's an overview of things you may want ...

Investing News

Despite recent spikes, oil will likely move lower over the next year. But how low can it go?

Stock Analysis

Large cash positions allow for many different options and here's why they are beneficial to shareholders.

Professionals

The right advisor credentials can make all the difference, but wading through some 100 certifications can be a ...

Investing Basics

For retail investors and money managers, portfolio management software makes life easier. Here are synopses of ...

Professionals

MLPs were in high demand for several years. Where do they stand now?

Credit & Loans

Saving for your kids' college tuition can be difficult. Here's how a 529 plan can help and how you, too, can help ...

Professionals

The terms some pension advance firms require can be costly. Here's how to be sure your clients aren't making bad ...

Retirement

Choosing whether to go red or blue when picking out your retirement dream destination is more than a matter of ...

Professionals

Smart beta strategies are all the rage. Here's how they work, but consulting with an adivsor is essential to know ...

Entrepreneurship

Understand what makes European entrepreneurs successful. Learn about six European entrepreneurs who have found ...

Investing News

Bringing an end to the speculation on whether to hike interest rates or not, U.S. Federal Reserve has decided to ...

Professionals

Learn why life insurance sales is a difficult career in which most people do not succeed, and understand what traits ...

Stock Analysis

Discover the latest information about T-Mobile's Advanced Messaging system and what it offers that is not available ...

Investing News

On Wednesday, Anheuser-Busch InBev (BUD) announced that it is planning to takeover SABMiller, which, if it happens, ...

Investing News

The Federal Reserve Open Market Committee (FOMC) decision to leave interest rates in the U.S. unchanged at record ...

Investing

The debate in the media over whether the Federal Reserve will announce liftoff this month or in December continues ...

Here is the original post:
Investopedia - Educating the world about finance

There are many types of investments that will ensure you a safe and secure financial future. While investing money may not be rocket science, it definitely is a science that takes time, effort, and perseverance to master and produce true results. In this article, we cover the following types of investments:

Liquid investments are investments that could be turned into cash relatively easily and assume various forms, such as savings accounts, Certificates of Deposit, Money Market Accounts, and other interest-bearing accounts offered by banks. Normally, these types of investments are FDIC-insured and although they offer low rates of return, they are relatively less risky.

Under the broad umbrella of bonds, we cover both savings bonds (Treasury Bonds) offered by the US government and corporate bonds issued by private corporations. The US Treasury is the largest issuer of savings bonds and normally these are very secure investment vehicles, given that they are backed by the United States Government Uncle Sam. These savings bonds are easily sold at most banks and can also be directly purchased from the Treasury Department online. As investments, the savings bonds are safe and stand by their promise of providing fixed interest rates.

In addition to government bonds, corporate bonds represent another major chunk of investment vehicles. Normally, corporate bonds are rated by independent agencies based on the level of risk associated with their issuer. Much like government savings bonds, they are relative safe but do carry some risk, given that they are issued by private corporations which are subject to loss, bankruptcy, and other risk-producing eventualities.

The nuts and bolts of an annuity boils down to some very basic contracting. You, as the investor, pay a lump sum amount to the annuity issuer, typically an insurance company. At a pre-defined period, typically your retirement, the annuity would mature and start paying you a fixed amount every month. The advantage of an annuity is that you will not have to pay taxes until the annuity payments actually start accruing to you. Although considered low risk, annuity provides charge high fees and their success is largely dependent on the reputation and stability of the insurance company underwriting the annuity.

A stock normally represents your ownership within the corporation. The advantage of holding a stock is that not only do you own a piece of the company, you also have the liberty to trade these instruments in an open market (and thus realize capital gains) and reap income in the form of dividends, which are declared when the company makes profits. Stocks, as an investment class, are very volatile and may be subject to sharp market fluctuations and uncertainty.

Mutual funds are a large aggregation of stocks, bonds, and other financial investments, except that they are managed by professional investors. The advantage of mutual funds is the possibility of diversifying your financial investment over a large pool of investments. Unfortunately, it is not easy to predict the risk and rate of return through mutual funds and depending on the professional expertise of mutual fund managers, the success is likely to vary.

For those who keep track of the real estate market, buying, selling, and renting property could be a viable financial investment. Not only will you realize capital gains if you invest in the right property, there is also the possibility of earning rental income. If you had purchased your property relatively early in your career, at retirement you may have paid off the propertys mortgage and so whatever rental income accrues is basically your profit (minus, of course, maintenance).

If you have bad credit you still can get loan from BadCreditPersonalLoans.net. Disclaimer: This article is not intended as investment advice. You must check with a qualified professional before making any investment decision.

Go here to see the original:
Find what type of investment is right for you - INVESTMENTS

British Dictionary definitions for investment Expand

(economics) the amount by which the stock of capital (plant, machinery, materials, etc) in an enterprise or economy changes

(biology) the outer layer or covering of an organ, part, or organism

the act of investing or state of being invested, as with an official robe, a specific quality, etc

(rare) the act of besieging with military forces, works, etc

Word Origin and History for investment Expand

1590s, "act of putting on vestments" (a sense now found in investiture); later "act of being invested with an office, right, endowment, etc." (1640s); and "surrounding and besieging of a military target" (1811); see invest + -ment. Commercial sense is from 1610s, originally of the finances of the East India Company; general use is from 1740 in the sense of "conversion of money to property in hopes of profit," and by 1837 in the sense "amount of money so invested; property viewed as a vehicle for profit." For evolution of commercial senses, see invest.

investment in Culture Expand

The purchase of property with the expectation that its value will increase over time.

Read the original here:
Investment | Define Investment at Dictionary.com

DEFINITION of 'Investment'

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

The building of a factory used to produce goods and the investment one makes by going to college or university are both examples of investments in the economic sense.

In the financial sense investments include the purchase of bonds, stocks or real estate property.

Be sure not to get 'making an investment' and 'speculating' confused. Investing usually involves the creation of wealth whereas speculating is often a zero-sum game; wealth is not created. Although speculators are often making informed decisions, speculation cannot usually be categorized as traditional investing.

Read this article:
Investment Definition | Investopedia

Free commission offer applies to online purchases of select iShares ETFs in a Fidelity brokerage account, which may require a minimum opening balance of $2,500. The sale of ETFs is subject to an activity assessment fee (of between $0.01 and $0.03 per $1,000 of principal) and is subject to a short-term trading fee by Fidelity if held less than 30 days.

$7.95 commission applies to online U.S. equity trades in a Fidelity account with a minimum opening balance of $2,500 for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal). Other conditions may apply. See Fidelity.com/commissions for details.

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive, long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Additional information about the sources, amounts, and terms of compensation is described in the ETFs prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc., and its affiliates.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

Based on two surveys: The PLANSPONSOR magazine 2014 Recordkeeping Survey ( Asset International Inc.), based on defined contribution plan assets administered and number of participants of recordkeepers, as of 12/31/2013; and Cerulli Associates The Cerulli EdgeRetirement Edition, Q1 2015, based on an industry survey of firms reporting total IRA assets administered for Q4 2014.

Kiplinger's magazine, December 2014. Results based on ratings in the following categories: total commissions, investment choices, tools, research, website, mobile, and advisory services. Criteria not equally weighted. In 2014, Fidelity tied for #1 with Charles Schwab in a survey that ranked 10 leading discount brokers.

Investors Business Daily, January 2015. Fidelity was named a top five broker among Charles Schwab, TD Ameritrade, TradeStation and Scottrade. Fidelity scored among the highest in research tools, investment research, educational resources, and portfolio analysis and reports. Results were based on having the highest Customer Experience Index within 11 subcategories, as scored by 10,480 visitors to the IBD website.

Fidelity won 18 of the 2014 U.S. Lipper Fund Awards, which honor fund management firms and individual mutual funds that have outperformed peers based on risk-adjusted, consistent return. Lipper designates award-winning funds in most individual classifications for the 3-, 5-, and 10-year periods. In total, 15 Fidelity mutual funds won 18 awards. See our press release for a list of winning funds and details on the Lipper Rating System. Fidelity Investments and Lipper are not affiliated.

Guidance provided is educational.

Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

Read the original here:
Fidelity Investments - Retirement, Funds, and Online Trading

Right now, a lot of investors are wondering about the uncertainty of rising interest ratesthe causes, effects and possible ramifications. Many people have been saying for weeks and months now that a rate hike is imminent and that September is the anticipated takeoff. read

Americans are utilizing the retirement savings features of IRAs more than ever. However, Roth IRAs are still underutilized, due in part to a misunderstanding of how the vehicle can be strategically used for retirement planning. read

Depending on your residency, as much as 41% of the gain on the sale of that collectible car might go to the combination of federal and state income taxes. Yet, tax planning for them has escaped all but the most sophisticated. read

Tsinghua University in Beijing has been ranked as Asias third best university, leading a strong Chinese cohort. read

One might be forgiven for thinking from all the media headlines that when the U.S. Federal Reserve eventually raises interest rates the world will be going to hell in a handcart. Whatever happens at the Feds meeting this week (16-17 September) - hike or not - history shows that rate tightenings dont always spell disaster. read

Last week, homebuyers gave acollective shrugto higher mortgage rates. Not that rates are higher.Theyre not. They will be, but house hunters have more important things to worry about. Not so much the Fed. This week, Janet Yellen & Co. will decide whether to raise rates for the first time in almost a decade. read

Later this year, the International Monetary Fund (IMF) will consider including Chinas currency (known alternately as the yuan, renminbi, RMB) in the basket of currencies that make up its Special Drawing Rights (SDRs). SDRs were created about 50 years ago largely as substitutes for disappearing gold reserves. Currently, the SDR currency basket includes the U.S. dollar, British pound sterling, Japanese yen and euro (which, as a regional currency rather than a national one, has no sovereign authority[...] read

Try being a market optimist these days. I guarantee, youll be mocked and derided. Somebody will mutter something about the Fed, insinuating that you are a blithering idiot who has no clue about market manipulation. read

Continued here:
Forbes - Investing Information and Investing News - Forbes.com

This article is about investment in finance. For investment in macroeconomics, see Investment (macroeconomics).

Investment is time, energy, or matter spent in the hope of future benefits actualized within a specified date or time frame. This article concerns investment in finance.

In finance, investment is buying or creating an asset with the expectation of capital appreciation, dividends (profit), interest earnings, rents, or some combination of these returns. This may or may not be backed by research and analysis. Most or all forms of investment involve some form of risk, such as investment in equities, property, and even fixed interest securities which are subject, among other things, to inflation risk. It is indispensable for project investors to identify and manage the risks related to the investment.

In finance, investment is the purchase of an asset or item with the hope that it will generate income or appreciate in the future and be sold at the higher price.[1] It generally does not include deposits with a bank or similar institution. The term investment is usually used when referring to a long-term outlook. This is the opposite of trading or speculation, which are short-term practices involving a much higher degree of risk. Financial assets take many forms and can range from the ultra safe low return government bonds to much higher risk higher reward international stocks. A good investment strategy will diversify the portfolio according to the specified needs.

The most famous and successful investor of all time is Warren Buffett. In March 2013 Forbes magazine had Warren Buffett ranked as number 2 in their Forbes 400 list.[2] Buffett has advised in numerous articles and interviews that a good investment strategy is long term and choosing the right assets to invest in requires due diligence. Edward O. Thorp was a very successful hedge fund manager in the 1970s and 1980s that spoke of a similar approach.[3] Another thing they both have in common is a similar approach to managing investment money. No matter how successful the fundamental pick is, without a proper money management strategy, full potential of the asset cannot be reached. Both investors have been shown to use principles from the Kelly criterion for money management.[4] Numerous interactive calculators which use the Kelly criterion can be found online.[5]

In contrast, dollar (or pound etc.) cost averaging and market timing are phrases often used in marketing of collective investments and can be said to be associated with speculation.

Investments are often made indirectly through intermediaries, such as pension funds, banks, brokers, and insurance companies. These institutions may pool money received from a large number of individuals into funds such as investment trusts, unit trusts, SICAVs etc. to make large scale investments. Each individual investor then has an indirect or direct claim on the assets purchased, subject to charges levied by the intermediary, which may be large and varied. It generally, does not include deposits with a bank or similar institution. Investment usually involves diversification of assets in order to avoid unnecessary and unproductive risk.

The Code of Hammurabi (around 1700 BC) provided a legal framework for investment, establishing a means for the pledge of collateral by codifying debtor and creditor rights in regard to pledged land. Punishments for breaking financial obligations were not as severe as those for crimes involving injury or death.[6]

In the early 1900s purchasers of stocks, bonds, and other securities were described in media, academia, and commerce as speculators. By the 1950s, the term investment had come to denote the more conservative end of the securities spectrum, while speculation was applied by financial brokers and their advertising agencies to higher risk securities much in vogue at that time. Since the last half of the 20th century, the terms speculation and speculator have specifically referred to higher risk ventures.

Business revolves around the factor of investing; financially, time, in the future and successful investors will generally focus on certain fundamental metrics for their gains. A value investor is aware that when considering the health of a company, the fundamentals associated with it, are a highly influencing factor. They include aspects related to financial and operational data, preferred by some of the most successful investors; for example, Warren Buffett and George Soros. The financial details, such as, earnings per share and sales growth, are essential aids for an investor in determining stocks trading below their worth.

The price to earnings ratio (P/E), or earnings multiple, is a particularly significant and recognized fundamental ratio, with a function of dividing the share price of stock, by its earnings per share. This will provide the value representing the sum investors are prepared to expend for each dollar of company earnings. This ratio is an important aspect, due to its capacity as measurement for the comparison of valuations of various companies. A stock with a lower P/E ratio will cost less per share, than one with a higher P/E, taking into account the same level of financial performance; therefore, it essentially means a low P/E is the preferred option.[7]

An instance, in which the price to earnings ratio has a lesser significance, is when companies in different industries are compared. An example; although, it is reasonable for a telecommunications stock to show a P/E in the low teens; in the case of hi-tech stock, a P/E in the 40s range, is not unusual. When making comparisons the P/E ratio can give you a refined view of a particular stock valuation.

For investors paying for each dollar of a company's earnings, the P/E ratio is a significant indicator, but the price-to-book ratio (P/B) is also a reliable indication of how much investors are willing to spend on each dollar of company assets. In the process of the P/B ratio, the share price of a stock is divided by its net assets; any intangibles, such as goodwill, are not taken into account. It is a crucial factor of the price-to-book ratio, due to it indicating the actual payment for tangible assets and not the more difficult valuation, of intangibles. Accordingly, the P/B could be considered a comparatively, conservative metric.

For investment purposes, an essential factor relates to how a company finances its assets, especially if it involves a sizable value stock and is a situation in which debt/equity ratio has a significant influence. Similar to the P/E ratio, the debt/equity ratio, indicates the proportion of financing, a company has obtained from debt; for example, loans, bonds and equity, such as, the issuance of shares and stock, which vary between industries. An indication to investors that all is not financially sound with a company, relates to above-industry debt/equity figures, particularly if an industry is experiencing a challenging, adverse business environment.

A factor that sometimes remains unaware to investors is that the earnings of a company generally do not equal the amount of cash generated. This is due to companies reporting their financials utilising, Generally Accepted Accounting Principles (GAAP). It is a standard framework of guidelines for the financial accounting practices used in any given jurisdiction. International Financial Reporting Standards (IFRS) are commonly used, worldwide.

Free cash flow is a metric that determines for an investor the sum of actual cash remaining in a company after deduction of any capital investments. In general, it is preferable to for a company to boast a positive free cash flow, but similar to the debt-equity ratio, this metric assumes greater significance in a difficult business environment.

Arguably, the most commonly utilized valuation metric is Earnings Before Interest, Tax, Depreciation and Amortization, generally referred to as EBITDA. This metric relates to the basic profits made, prior to the influences and intricacies of accounting deductions becoming issues of the true profit line of a company. This particular metric is recognized as the primary standard of private mergers and acquisitions.[8]

For a company competing in a high growth industry, an investor could expect a significant acquisition premium, which is a buyout offer, several times over the most recent EBITDA. In various instances, it has been known for private equity firms, to pay multiples of up to 6-8 times the EBITDA. However, some buyers could make the decision that even given these relatively high valuations, the offer from a buyer does not take into consideration past expenditures and future potential product growth.

In certain cases, an EBITDA may be sacrificed by a company, in order for the pursuance of future growth; a strategy frequently used by corporate giants, such as, Amazon, Google and Microsoft, among others. This is a business decision that can impact negatively on buyout offers, founded on EBITDA and can be the cause of many negotiations, failing. It may be recognized as a valuation breach, with many investors maintaining that sellers are too demanding, while buyers are regarded as failing to realize the long-term potential of, expenditure or acquisitions.

Types of financial investments include:

See more here:
Investment - Wikipedia, the free encyclopedia

Latest Articles Beat the Feds Zero-Interest Policy With This High-Yielding Asset Chart of the Week

by Ryan Fitzwater Saturday, September 12, 2015

Everyone is talking about the Feds upcoming FOMC meeting. The big question on investors minds... Will the Fed finally abandon its zero-interest rate policy and raise rates? Read On

by Sean Brodrick Friday, September 11, 2015

The source of good jobs for Americas workforce is being hollowed out and replaced with bartenders. Should we blame Obama for this? After all, hes getting the credit for the low unemployment rate... Read On

by Matthew Carr Thursday, September 10, 2015

After a rough run for blue chips, lot of people are thankful that August is finally over... But this wasnt an anomaly... Read On

by David Fessler Wednesday, September 9, 2015

At the moment, the bulk of U.S. electricity comes from coal, natural gas or nuclear-fired power plants. This sector is changing that - and creating a huge opportunity for investors. Read On

by Marc Lichtenfeld Tuesday, September 8, 2015

Using storms in the market to sell put and call options is a great way to earn extra income. Find out how in this article. Read On

by Andrew Snyder Sunday, September 6, 2015

The Federal Reserve has two equally important mandates... to keep inflation and employment just right. Unfortunately, its increasingly powerless against a growing trend. Read On

by Anthony Summers Saturday, September 5, 2015

The last two weeks have been a roller coaster ride for investors. But as this weeks chart shows, things are about to look up. Read On

by Alexander Green Friday, September 4, 2015

No one ever knows what the market will do next. So the wisest course of action is to always hedge your bets... and follow our Escape Hatch Strategy. Read On

by Richard Smith Thursday, September 3, 2015

Last weeks drop bucked a lot of investors out of longstanding positions - positions they werent planning to sell. Todays guest post from Dr. Richard Smith shows an alternative way to protect your portfolio. Read On

by Sean Brodrick Wednesday, September 2, 2015

The recent roller-coaster ride in stocks has left investors skittish. But if you ask Sean Brodrick, you should be buying these pullbacks with both hands. Read On

Here is the original post:
Investment Education & Advice for Investors - Investment U