Investing in My Future
Investing in My Future
When people think about their future, they mostly think in terms of investments. Investments are products or services that are purchased by individuals with the aim or expectations of making a profit, generate income, or both. There are different ways in which I will invest in my future namely cash equivalents, lending as well as ownership investments. Cash equivalents refer to investments that can easily be converted into cash. An example of this includes money market funds which are just like saving accounts whereby an individual leaves their money for less than a year but more than three months and in turn, they get a higher interest rate. My second type of investment would be lending investments, the risks in this type of investment are relatively low and have modest rewards (Sachse, 2012).
An example of these includes savings accounts whereby the individual who has money in the bank earns interest over some time (Morellec, 2015). This is because they are somewhat lending the bank money and if the money is loaned to other businesses then the individual makes a higher interest rate. As much as the returns from these kinds of accounts are low, there are no risks for having this account.
Bonds that are issued by companies or the government usually pay an individual after some time. The only risk involved with this investment is that when they go bankrupt, the individual who owns the bond has little to no investment. However, lending investment generally has low risk and their returns are lower as compared to ownership investment. My third type of investment will, therefore, be the ownership investment which is also the most profitable (Banerjee, 2013). Examples of these include stocks; stocks are shares in a company and the investor benefits when the company makes a profit when its value increases or both.
Investors get profits depending on the market value of their assets, for instance, if a company records making profits, then the company is likely to attract more investors and if an individual decides to sell their shares at this point, they make profits. Businesses are another type of investment since entrepreneurship is rewarding depending on the product or service that is being sold and the amount of hard work that is put to sustain the company. Real estate and owning precious collectibles are good investments since their value rises and falls over time.
I am more confident investing in ownership investments, this is because once I own these investments I could easily create employment and increase my profits. For example, if I invest in real estate, I should employ people who will be part of managing my property in different locations and once the value increases or falls, I can sell some of my property and invest in a more profitable location. Also, if they had precious collectibles and their market value fluctuates then I could decide to sell mine and make profits or buy more over time and resell them once their market value increases. I would be confident about these because they are long-term investments that could benefit families for generations.
The most challenging investment would be the ownership investment since it requires a lot of finances to purchase and manage. For investing in homeownership, it may cost more than expected due to lawn, plumbing, and furnishing services and if they are not budgeted or planned, they may incur unnecessary debts. The solution to this is having multiple sources of income and creating time before venturing into other ownership investments. Budgeting and cutting costs in purchases will help me save more and invest slowly in products that will be profitable in the future.
Banerjee, S., & Masulis, R. W. (2013). Ownership, investment and governance: The costs and benefits of dual class shares. ECGI-Finance Working Paper, (352).
Morellec, E., Valta, P., & Zhdanov, A. (2015). Financing investment: The choice between bonds and bank loans. Management Science, 61(11), 2580-2602.
Sachse, K., Jungermann, H., & Belting, J. M. (2012). Investment risk–The perspective of individual investors. Journal of Economic Psychology, 33(3), 437-447.
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