What is an investment?
An investment is any vehicle into which resources can be placed with the expectation that it will generate positive income, or that its value will be preserved or increased, or both
It is important that you know the basic investment vocabulary because we are going to needed if we want to talk the stock market language.
a.k.a. investment rewards
Income – interest, dividends, rent
a.k.a. cash flows (any money coming in to your pocket)
Increased value / Decreased value
a.k.a. capital gains, capital appreciation (Great) “it went up in value”
a.k.a. capital losses (Bad) “it went down in value”
You may find this list to be long and tedious but is the basic language of the journey we are about to embark, you may find opportunity at each different type of investing creating multiple streams of income and a well diversified portfolio of investments so that you can collect your money from them.
Investments that represent debt or ownership or the legal right to acquire or sell an ownership interest
(a.k.a. financial investments)
Real property (land, buildings) and personal property (precious metals, autos, art, collectibles, etc.)
a.k.a. real estate, hard assets, tangible assets (assets that you can touch), commodities
Examples: Education and Training Travel
Education is often the best investment a person will ever make – Why?
Because it makes us make better financial decisions that can become more profitable than anything.
Funds lent in exchange for interest income and the promised repayment of the loan at a given future date
Examples: Bonds, Short-term investments (savings accts, etc.)
Ownership in a business or a property
Examples: Stocks (corporations), Partnerships, Sole Proprietorships, Real Estate, Real Estate Investment Trusts
Securities that derive their value from an underlying security or asset – normally highly speculative
Examples: Options, Futures
Based inside the United States
Based outside the United States
Be careful of this subtle distinction
-International (a.k.a. Foreign) ≠ Global
We made it!! Not so hard right? Turn to next section to continue… It gets better.