Under investment, precision investment refers to the investment of funds by converting capital into assets or other financial instrument. The goal is to generate added value or ideally an income. Goods meant for consumption are not counted as an investment, but instead entails investment made through direct investment.
That is, financial interest in a company or through a bank with the acquisition of savings products, or by placing resources in the capital market through the acquisition of shares or debentures.
However, investment is inherently accompanied by the risk of loss of the principal amount. An investment which is badly analyzed can turn back and haunt the careless investor, as in some cases the possibility of losing money will fall out of the investor control, once a commitment is made.
An good investment should pursue the following objectives – high security (loss of capital should be minimized), high yield (investment yields the highest possible yield within a specified period), high liquidity (making disposable returns, in a quick fashion), and responsibility (the ethical aspects of investment such as environmental or social ideals (e.g, no child labor) must be observed ahead of financial gains.
Fixed asset investment relates to the production of goods that are not consumed instead are meant future production. These can include tangibles like railroad or factory warehouses and intangibles such as skills training, etc.
There are various investment options available to individuals and companies that offer varying levels of monetary returns. These include demand deposits, term deposits, savings deposits, bank savings bonds, fixed-income securities, and promissory notes or bills of exchange.
On another level, investors can also opt for stakes in companies and capital goods through shares, fund equity or real estate. While derivatives and structured financial products include hedge funds, options, futures, credit default swaps, etc.
Others may find gems such as diamonds, gold and other precious metals in the form of bullion coins appealing, or alternatively art collections, stamps, paintings, carpets and antiques among others.
Objects of art have a value beyond that which is solely resultant from the appreciation of market participants. Expectations for art and antiques are also usually based on speculation of rising prices due to higher valuation by the market players. Art prices depend very much on the market value and are also influenced by the artist.
Savings certificates usually bring a higher interest rate than investment in a savings account, in contrast to the interest rate for the entire agreed term which is fixed.
In the main, investment is often simulated as a function of income and interest rates, an increment in income promotes much greater investment, whereas a higher interest rate can deter investment due to the inflated cost of borrowing funds.