Financial Investment Definition
People, with more than enough bank balance, often look for luculent profitable opportunities to invest and make the most out of their money. Feasible options of financial investments which come with a risk-free guarantee, are hard to find in the market these days. Corporate internationals and individual entrepreneurs are always in search for such adaptable financial investments of varied proportions which will multiply their funds and amplify their company’s growth eventually. Considered as the perfect way of utilizing unused bank balance, financial investments can simply be defined as the money which is spend in any renowned and listed financial investment organization. Such monetary investments are availed by both public and private organizations irrespective of their corporate value in the market.
Features of Financial Investments
Such investments find its utility in different approaches. Different entities have distinctive set of purpose for their each and every financial endeavor. For instance, private multinational organizations confer with financial investment consultants for better opportunities to augment their source of income. Retired people save funds for their old age and uncertainties. Few experienced and well established corporations put money in various emerging organizations to multiply their investment and gain largely. Even government organizations, who wish to expand their base, invest in various projects and achieve social and political advantage. Irrespective of the purpose of financial investment, the money should be spent in a presumed and developed company whose reputations precede all. Though, 10 out of 8 companies promise to offer outstanding financial return on every investment, only a few keep up to their word. The creditability of any financial organization depends on its background and past performance. So it is always recommended to look before you leap and conduct a proper market survey before investing in any financial organization.
Financial Investment Advisor
According to the definition of financial investment, a financial investment advisor is an adroit and skilled consultant aimed at offering effective and poignant financial investment advice to individual investors or corporation houses. By offering expert financial advice after properly allocating all the assets, an advisor assists a prospective investor to maintain a straight line between investment income and capital gains
Such advisors prefer to utilize mutual funds, stocks, real estate investment trusts, bonds, options, insurance products, futures etc to appease their clients. The funds of the investors are channeled via such modes. Most of the financial advisors are offered money for their services and are entitled to commission only. Out of others, fee based advisory plan is gaining huge recognition in the current period.
Fee-only financial advisors are the principal choice of major financial investment companies. Such advisors are given compensation only by their respective clients. Such financial advisors attain their compensation by an amalgamation of hourly fees, asset management money and financial planning charge. An advisor may get affiliates, rebates, commissions, awards, bonuses, finder’s fees along with different types of compensations due to the proper implementation of the recommendations given to the client. Advisors should never ever receive such compensations and should not accept them in any case. By doing so, an advisor maintains the code of conduct as formulated by financial investment companies and removes the chances of any kind of conflict with their client. By following the code of conduct a financial advisor signifies that he/she is not indebted to any insurance or any other financial company.
A fee only advisor may minimize disagreements of interests such as:
- Proposing a client to purchase products and invest in situations when holding cash along with other liquid assets would have been a better advice at that time
- Proposing a client to purchase products and issue commissions via unwanted buying and selling of certain securities.
- A commission to change real estate, collectibles and other such non-cash assets into hard cash which will enable a financial investment advisor to charge incentives.
- A commission to make proposals which offers better sales commissions to any advisor when there a cheaper option is available in the market.
A number of financial investment advisors receive payment for there services in the form of commission. Such advisors provide effective and productive financial investment advice to their respective clients in exchange of a certain percentage of commission, which is charged on the profit earned after recommendation.
Financial Investment Planning
Financial investment planning is done by investment advisors for better outcomes. Financial advisors assist their customers make profitable and high-earning long term and short term investments. The primary duty of financial advisors is to guide their clients towards the right investment scheme and upgrade them about the risk involved in particular investments. A good financial advisor recommends volatile investment schemes to its clients. It may involve bigger risks but the rewards are worthy. Direct investments in stocks or collective investment products namely unit investment trusts, mutual funds, unit trusts etc are few examples of such money making schemes.
For instance, if any particular client has short term goals for such investors and advisors should recommend financial investment schemes which are less volatile in nature of shorter time period. Cash deposits, certificates of deposit along with short term bonds are few examples which help to explain what the exact meaning of volatile investments is. One of the major drawbacks of such investments is that the return is relatively low since the risk involved is less. Due to the zero possibility of losing the principal amount, people find it safe to invest in such schemes to protect their capital.
Financial Investment Organization
The creditability of any financial investment company depends on its past reputation and its performance till date while making financial transactions. The main and sole objective of such organizations is to do business by buying securities of other well established renowned companies only for investing. An investment company operates by putting money in the shares and bonds of other companies on behalf of other shareholders with there consent. These shareholders then share the profit or loss earned via the investment approach.
An investment company can be of any form, depending on the intention of its directors. However, there are primarily three basic forms of financial investment organizations, namely:
Open-End Management Investment companies
These are also called as mutual funds. Mutual funds are popular through out the world for their surety of return on investment. It is a type of collective investment scheme which is dealt with professionally. It draws out the funds from different investors and purchases securities. Such collective investment schemes are open-ended, regulated and are available to the general people who are not regular investors.
Closed-End Management Investment Companies
Also called close-end funds, these are listed on well-known stock exchange boards and can be brought and sold. The market determines the cost of each share which is dissimilar from NAV-Net Asset Value per share. The price that is fixed is called as premium or discount to the Net Asset Value.
Unit Investment Trusts is another type of exchange traded mutual fund. The essence of such funds is that they offer portfolio of securities which have a fixed period. The authenticity of UTI is guaranteed by Securities and Exchange Commission under the Investment Company Act of 1940. Unit investment trusts are put together by any specific sponsor and then sold to investors via brokers.
Financial investment is an important term. People can become wealthy if they understand the pros and cons of this term. If used wisely, appropriate financial investment can be one of the best money making schemes you have ever imagined.