Financial freedom can be very liberating at the end of the day. This is the reason why many people these days focus on the pillars of personal finance. If you know the pillars of personal finance, financial freedom will follow. The pillars of personal finance include spending, building assets, investing your money and diversifying.
Of all the pillars, most people ignore investment. Investment is the process of purchasing goods that are used to generate wealth in the future. Without investment, you simply live every day as it is – uncertain. It is not yet too late to consider investments. There are different kinds of investment that you can consider. Here are the different types of investment:
This type of investment stays constant regardless of the income level. The autonomous investment refers to the investment made on buildings, houses, roads and other infrastructure. This type of investment is common for governments.
This type of investment is related to the income level of the person. Entrepreneurs with a high-income level tend to invest more. This is because the consumption expenditure will increase leading to an expanded investment of capital goods in order to generate more consumer goods.
In financial investment, the money used to buy new shares and bonds have a positive influence on the economic growth. However, the money that is used for buying existing bonds, securities and shares are not considered financial investment because it is merely transferring financial asset form one person to another.
Traditional investors believe that the best way to build wealth is by owning stocks. For others, investing in bonds is considered the safest way to make money. It is important that you know the difference between the two. Stocks are shares of ownership in a particular company. The stock prices will fluctuate depending on the circumstance. Bond, on the other hand, means lending the money to a company. As an investor, when you buy a bond it means you are lending the money to the company, which will be used to grow their business.
This type of investment gives emphasis on new machine tools, and equipment purchased factory buildings. These things surely increase employment and will definitely lead to economic growth of the country.
In this type of investment, the investor has concrete plans of the investment. It is also called intended investment. One example is Davenport Laroche, which is a shipping container investment agency based in Hong Kong. The container agent has concrete plans and in-depth knowledge that allows shipping container owners to connect with numerous ship merchants.
Shipping container investment includes purchasing and leasing of new or second-hand shipping containers. Investors are usually promised high return rates based on the demand from the cargo shipping industry.
Whatever investments you have, it is important that you know the basic. Aside from learning the different types of investment, you have to learn about risk and return (remember the higher the potential return, the higher the risk), risk diversification (to reduce the chances of major losses by spreading investment), compound interest (addition of interest to the principal deposit) and the inflation (increase of prices and fall of money’s purchasing value).