The Empirical Value of Money and Banking

Introduction to Financial Investments

In the Financial World, investments are financial products or financial items that have value that is expected to produce favorable future returns for the investor over time. To an individual, an investment is anything that can make more money down the road, increasing the net worth or equity.

Financial investments can come in various forms. In the general business world, investments can be equipment or inventory. In personal finance, it often hears real estate or deposit accounts (CDs, money market accounts) used as investment vehicles. However, to a more sophisticated financial advisor or investor, there are 4 major types of investments: Mutual Funds, Stocks, ETFs (Exchange Traded Funds) and Bonds.

Investment management companies (also called brokerages) create Mutual Funds and ETFs for their clients (the investor). Stocks and Bonds are created by regular public companies (like Google or Microsoft) as a way to raise money for operations. Bonds can also be created by government agencies to raise money.

Mutual Funds, Stocks and ETFs are products traded (basically meaning bought and sold) in the equities market (also known as the stock market), such as the New York Stock Exchange and NASDAQ (National Association of Securities Dealers Automated Quotations) –the two biggest equities markets in the United States. As the investor, making profits based on whether the value of the investment increases over time, or from the time it was bought to the time it was sold. Bonds are not traded in the equities market because there is no central marketplace for bond trading; rather, they are traded through individual dealers. By investing in bonds, the investors make money when the company or agency pays the interest dividends at timed intervals or at maturity when they repay for the bond plus any interest.

Types of Investments

There are many types of investments that will ensure investors a safe and secure financial future....