Financial investments are designed with the hope of generating at least future income from the business where financial investment is being pursued. In most vital financial investment investor looks forward to much more than the financial investment as compared to the financial investment. Financial investment options are diverse and depend on the kind of risk associated with each financial investment option. These financial investment options can be long term or short term, for example, bond funds, stocks and mutual funds, etc. Here we shall see some of the financial investment options available for both the long term and the short term period.
Businesses dealing with financial investments should know the financial investment options before taking a decision. The selection of financial investment depends on the nature of business, tax benefits and return anticipated. Most business houses prefer to bond funds as financial investments due to their safety and guaranteed returns. Bond fund yields depend on the risk and the stability of the issuing firm. Long-term bond yields are always higher as compared to short-term ones. These financial investments yield higher returns if the company is stable and is not likely to go down in the near future.
There are two basic categories of financial investment options: domestic and international. Domestic investments include fixed income portfolios like bonds, savings accounts etc., that yield low returns. These investments also have a longer duration of the period and can be used as safety nets during unfortunate economic or financial situations. International investments include stocks, shares, derivatives instruments and currencies. The value of these financial investments increase with appreciation in stock markets, currency exchange rates or commodities.
All the assets in a portfolio are considered for an investment analysis. The expected return on the portfolio, which is the sum of all returns over time is calculated. This calculation uses various assumptions like amount of risk, rate of inflation and other factors. Some investors may like to diversify their investments. In this case, they would prefer to spread their assets across different sectors or areas and invest in the area that has a higher per capita income.
Wealth management refers to the process of protecting wealth or protecting the financial investment managers from unexpected losses. It is the ability to plan and act in response to changes in financial circumstances. The planners will consider different scenarios that could affect the portfolio, both short and long term. The approach of financial investment managers will differ. Some will invest using the philosophy of spot the opportunity and exit the position; others will be long term trend makers and invest according to what the market may be led to. The approach to wealth management will vary from one financial investment manager to another.
All the investment managers will use similar asset allocation strategies. This involves the selection of a suitable group of stocks or other assets to suit the needs of the investor. This is known as asset allocation strategy. A manager will use certain asset allocation strategies like value investing, balanced portfolio, etc.
Equity is a mixture of stocks and bonds and other financial investments. A stock will represent an ownership interest in a company. A company will be an important part of the economy and therefore it is quite possible that the prices of the stocks and shares will fluctuate in time. A market speculator can buy or sell the securities depending upon the current financial scenario and expectations of the company. When purchasing these securities, investors should be aware of what they are buying. These may be equities bonds or commodities.
All the investors must do is to calculate the returns on their portfolio. The expected return calculation is the financial investment managers ‘bread-and-butter’. This means that this financial investment manager’s calculation is that the investors must rely upon in order to keep the portfolio balanced. The expected return calculation is the key to sound financial investment decisions. The calculation will tell us about the profitability of the different assets in the portfolio and what kind of returns the investor can expect over the time.