You have been working hard to earn the money needed by your family. As much as possible, this money is placed in a bank to earn interest while you think of other money making ventures which you might consider as business investments. Investments can be defined into two types, finance and economics. The former as the purchase of assets, which gives the opportunity to an investor to gain future income with an interest and appreciation but the latter is the acquisition of physical machinery, properties and inventories.
There are many types of businesses that are good investments for your money and each have their own story to tell. Risk is always a key factor in every investment. In fact, the realization in terms of return of investment may depend on what kind of business is involved.
Business investments may either be long term or short term. Long term investments normally connote more than one year in terms of duration and include real estates, bonds and stocks. This type of investment denotes interest of one company to another company in terms of gaining influence to its operations based on its purchase price.
This means the company’s intention is to earn income from that company over a certain number of years and has no intentions of selling its gained interest. A long term investment involves time, examples of which are plans for an individual’s future upon retirement, investment on a dream house or college funds.
Short term investments are investments that are immediate in nature. Risk in this form of investments is very high and usually characterized by fluctuation in prices. The goals set are relatively small and maturity dates are brief in terms of people who want to invest on a limited time. Both short term and long term investments do have potentials as money making baskets, albeit it really depends on how much gain an investor is planning to target.
Volatility in both investments are very much active but have varying degrees of effects. Short term investments have greater risk of non- attainment of goals in terms of gains. Incomes generated are taxed differently and may incur other expenses like high fees in brokerage commissions. Profits expected are not that high and at times bearish (falling stock market prices).
Long term investments are relatively low risk in nature. Investments curtail a higher return of expected gains and may well be classified as a systematic plan of achieving wealth for individuals and companies. Taxes withheld are low in reference to capital gains and tax brackets. Negative impacts on income due to price swings are limited and will generate a notable increase in value over a period of time.
Time and volatility are considered as more of an advantage in long term investments and is able to withstand low periods in the market. Any expenses that might be charged like costs for active transacting is low, which is a plus for investors thus providing a better option for those planning on engaging in business investments in the future.