Considerations Before Making Investments Essay

1022 Words Aug 15th, 2010 5 Pages
Investment has got a various number of definitions related to in which context it taken. In our case , we are going to take two contexts to give a definition to this term of “ Investment ’’
In Business Management , Investment can be defined as a tangible assets like equipments, machinery and buildings and intangible assets like patent, goodwill and copyrights . Making a decision for investment is known as capital budgeting decision, regarded as one of the important and key decision.
In Finance, Investment can be defined as the purchasing of financial assets and securities from capital market , or buying money market or real properties with high market liquidity. Examples silver, gold, precious items, real
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Verify the annual report of the company and find about their operations, products, basic and services business track record. All these information can help to get an idea how stable the company is and how the company can offer profits to investors Some verification must be undertaken such as:
-Financial history
-Financial records
-Stables assets
-Positive cash flow

3. Diversification of Investments
It is very safe for a company to invest to one or two targets. It compulsory for the company to spread investments in stock market . Investing all into one thing may be very dangerous and it can happen that the company may goes under due to a certain reason ,and the stock price will decline and the company could lost everything.
It a good strategy to diversify your investment by making a selection of variety of securities , diversification is able to reduce the risk a high level rate( 70%) of the total risk of investment. If all the money in put in one place , the return will depend only on the performance of that one investment, alternatively if investment is made in several assets , the return will depend on your various investment return.
Find below three basic means to diversify investment: * Choose a variety of funds and securities within one asset class, e.g. stocks from small , large , meduim companies in different industries. *

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