Business Investments - Essay Example

What does it mean to invest? During our grandparents’ time, it was called “saving for a rainy day,” which is exactly what investment means to the personal investor, with all its implications about intending it for a future time of need. However, instead of putting that savings under the mattress or burying it in a metal can in the yard, where it remains stagnant, savings nowadays are “placed” – either in a savings or time deposit with the bank, lending it to the government through government securities, or making it available for business through stocks or bonds – things we call financial assets.

It could also be used to purchase land, jewels or works of art, things we call real assets, which grow only more valuable with time. Sometimes, investors prefer to place their savings in one asset, such as a savings deposit. Such a plan may be simple and straightforward, but it has all the disadvantages of the proverbial eggs-in-one-basket: drop the basket and you lose all your eggs – figuratively speaking, that is. The prevailing wisdom is to put some eggs each in several baskets – that is, to put part of one’s savings in each of several alternative investment vehicles.

Each “vehicle” runs in its own way. Some, like Mini cars, are safe but don’t go very fast; some, like Ferraris, race like the wind but tend to crash at the hands of an inexperienced driver. Some, like BMXs, are quick to sell off for cash, while others, like BMWs, take time and effort – and sometimes a middleman – to liquidate at a good price. Let’s take a look at these “vehicles,” which are also called “instruments” because they are used to realize future goals. At present, your money is in some sort of deposit account, maybe a savings or time deposit.

This is the safest place you could keep your money in. Unfortunately, it isn’t a good investment at all. The best savings account interest rate offered at present is 1.78%