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Investments are investments that are purchased by people who wish to make returns out of the spare money they earn. These investment investments could be purchased either by individuals or corporates, governments or domestic and foreign institutions. Investment is generally referred to as the money used to make more money. It is the employment of funds to generate favorable returns taking into consideration various attributes of investment is. These Investments are taken up after considering attributes such as the rate of return, risk, safety, hedge against inflation, liquidity and tax shield. Industries categorize their investments on the basis of the time contribution they could make the risk appetite they have and the objective they have in mind while making the investment. There are different investment methods, namely debt investment, equity investments and hybrid Investments. Debt investments and equity investments are of two types public and non-public. Public investments are the ones which are traded in the open market and their sale and the purchase could be done by anyone where has private investments are the ones which are not traded freely in the open market. Debt investments are safe and it generally used to create a constant income stream and for the repayment of the principal amount after a fixed period of time. Equity investments are based on the principle of high risk and high reward. They are generally large in scale and riskier than debt Investments. Examples of debt investment could be debentures, bonds, credit swaps and loan receivables. Hybrid investment methods combined the elements of both equity investment and debt investment. They are less vulnerable to the changes in the market and the performance of the company. Bonds are the most common that investments used in the market as they are backed by an asset of the issuing company and in the case of failure of a company the bondholders are paid by auctioning or selling of the company assets. Loans are generally taken for financing consumer goods some kind of business. Debentures are assets that do not have an asset backing and are used for raising capital for short terms of the period for specific projects.

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There are many types of equity investments also such as shares that are a portion of the company capital that is traded in the stock market and is affected by the performance of the company in a positive or a negative way. Equity Mutual Funds are the ones which are managed by a fund manager and is made in the form of a Portfolio with the contributions of multiple investors who wish to make money. Futures and options are also a kind of equity investments that derive their value from the stock or index they are for a limited time period and affected by the changes in the price of the stock or index increase or decrease. Insurance is also a kind of investment that is taken up to hedge against the risk that may come unannounced and take a toll on the life savings of a person. They are a kind of risk management tool that safeguards the investor from the hazards that are unseen. They may be very helpful in case of an adverse financial consequence and also favorable in terms of tax treatment. They’re also flexible and the premiums could easily be adjusted according to the requirements of the investor.

Would you like to read more about this topic? This book might interest you: Introduction to investment methods.

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