The Investment Environment

The Investment Environment IP #1

FIN 420

By Behzad Ravan

American Intercontinental University

Abstract

In a request by my employer, I have been asked to write a manual about the US Bond Market for the use of new employee training manual. In this paper, it will address the key players of the market, types of investments available for individual and institutional investors, how are transactions carried out, the relationship between the bond market and the stock market.

We start our manual by defining investment. An investment is the purchase of a financial product or other item of value, such as gold or silver, in the expectation of a favorable future return, which in other words, it’s the use of money in hopes of making more money (Investopedia, 2010).

There are two types of investors, the individual investor and the institutional investor. The individual investor is the everyday “you and me” investor. The individual investor is focused on the personal finance and mainly invests for retirement, college funds, house and/or a trip. The institutional investors are companies and firm that are compensated for managing other individual or company’s money. These institutions can be banks, life insurance, hedge funds and many more.

Types of Investments

There are several types of investments that an individual investor can choose along side with the institutional investors. The individual investor has the option to invest in short term investments like Certificate of Deposit (CD), money markets funds and any other investment that has duration of less than one year. Long term investment is geared to the individual and institutional investor which investments have a maturity date longer than one year. These investments can be bonds, stocks, mutual funds, tangible investments like properties and much more (Jones, 2010).

Things to know before investing

1. Over the long term, stocks have historically outperformed all other investments

2. Over the short...