Investment Articles

There are various investment strategies that are utilized with different hedge funds. These are lightly-regulated investment funds that are open to only a limited range of investors. These investors are required to pay a performance fee in order to fund the investment manager. The name comes from the fact that hedge funds will try to “hedge” some of the risks that inherently exist in investments by using short sales and derivatives. To hedge means to offset price changes in order to minimize unwanted risk. In order to qualify for investing in these funds, you must meet certain criteria put together by those who regulate it. These funds often total billions of dollars in new asset value, obviously giving you the chance to see high-yield returns.

You do not have to be a financial wizard to invest in hedge funds if you qualify, but it will take a great deal of your time and knowledgeable advice from your fund consultant. When you get started investing in these funds, you must be sure you are an accredit investor. Before investing in anything, learn as much as you can with regard to these funds. Read articles and evaluate fund managers’ commentaries. If you have any acquaintances that are currently working with these funds, or have experience investing previously, speak with them about your various options.

After you have gone through a good amount of research, utilize what you have gleaned to choose a licensed hedge fund consultant or broker. You will only want to associate with someone who has integrity and is willing to suggest various kinds of funds for you to think about investing in. Since there are various strategies, never bank on only one for every opportunity for investing in these funds that comes you way. Consult your financial advisers for help determining which strategy will work best depending on the situation.

The final note is to keep yourself informed. Ask for monthly or at least quarterly reports from your fund manager to stay involved in your own investments at a vigorous level. Learn about which market movements will affect your decision to invest in these funds the most. Keep an eye on trends and how they may affect your hedge fund investments. With multiple strategies out there for investing in hedge funds, it is obvious that there is more than one way to make your investment. By teaming with a knowledgeable and trustworthy consultant or broker, you will benefit from their knowledge as they get you started in the investment process.

Sean Johnson is an Investment Advisor for http://www.inquest.biz an Investment Referral Service for investors requesting information on specific investments.

If you’re reading this article, you are probably already skeptical about the contents and thinking to yourself what kind of gimmick is this going to be about. Yet, in the back of your mind you’re hoping that maybe, just maybe, there is some validity to this rhetoric of turning 1,000 dollars into 1 Million dollars and so you read on.

The reason I know this is because this was me a few months ago. It started when I was about to deposit the 1,000 dollars I managed to save into a savings account. I began thinking about what I would have at the end of the year at an interest rate of 6% and it wasn’t very much. I would have a meager 1,060.00 dollars and that just didn’t excite me. That’s when I learned about opportunity investing.

My goal now was to locate investment opportunities that held intrinsic value. It is sort of like buying one dollar bills for seventy cents. The fact that I can easily resell my seventy cent investment for its true value of one dollar or higher, (depending on the buyer) would give me a capital gain of thirty cents, or a 30% ROI. This would be the compass that would determine which direction I would go in my pursuit of investment opportunities.

There are two fundamental features that are required in this investment process before moving forward with an investment; Risk Management and Risk Assessment. The Risk Assessment is the formula that is used before making a commitment to the investment opportunity i.e., the 30% rule mentioned above. The Risk Management are the terms that you include in the deal to offer added protection to you, the investor, in the event the deal doesn’t turn out the way you expected.

Find a buyer before your money leaves your account

Whatever you decide to invest in, whether it’s Real Estate, Boats, Precious Stones, Wholesale items, etc., you should already have an idea of who your buyers are and where they are. If you can receive a firm commitment from a buyer for your investment object, many times your money never leaves your account. Instead your account activities consist mainly of deposits of your capital gains, which is your profit after all other expenses are paid. By repeating this process over and over while sticking to these principles, you will meet your financial goal.

This investment strategy has been used by the wealthy for decades. The velocity in this type of investing occurs when you stick to this formula and reinvest your capital gains back into your business. The best thing about this investment strategy is you can start with whatever amount you have to work with. If you start with 100 dollars and follow the 30% rule, over a period of time you too can build wealth in the tune of 1 million dollars. You have nothing to lose, so get started today and I’ll see you at the top!

Imagine doubling your money every week with little or no risk. Free e-book reveals the easiest way to become a millionaire – a step by step guide with principles you can begin applying in your life immediately. For this incredible e-book click here http://www.moneymagnetguide.com.

Connie Sloane is a writer and researcher of profitable on-line businesses. She enjoys sharing tips and useful information for people who want to make money on the internet.

Over the past few months we’ve seen the price of gold head higher. Just recently many investment analysts have predicted the price to continue its meteoric rise with $1,500/oz sited by year end and $2,000/oz within the next 18 months. Over the past decade gold has returned an average of over 25% a year. Yet, still only a small percentage of investors own physical gold, especially in the UK.

Total net investment in gold from start of 2010 through to July 31st was $2.7 billion. Yet, in the course of the same period, investors poured $22 billion into emerging markets mutual funds and $155 billion into bond funds. In comparison to these numbers, the total amount invested into gold is negligible.

So why are so many people ignoring the asset as part of their portfolio?

I certainly don’t think it’s due to a lack of awareness of gold. The press coverage over the past few years has been phenomenal. Most people are now aware that gold can be bought as an investment, and that it performs well as a safe haven asset. So surely that’s half the job done?

The main barrier preventing the average investor buying gold is mindset. Many modest investors and savers still perceive gold as being elitist and out of their reach. They don’t realise that you can buy a Sovereign coin for just over £200 or tiny gold bars for £50 or less! Certainly the US retail market is at least 10 years ahead of the UK market in terms of the average person owning some gold as part of their portfolio. It’s only a matter of time before we catch up. Only a small fraction of UK investors have considered alternative assets at all. Most still stick to traditional paper assets such as stocks, bonds and cash. However, with huge losses from these assets over the past few years more people are now opening their eyes to the world of alternatives, including gold. More are now realising that a true balanced portfolio needs to include a wider range of assets. Traditional currencies such as the Dollar, Sterling and the Euro are now threatened, so we are gradually seeing more savers using gold as a store of wealth rather than leaving all their liquid assets in a Sterling savings account. But these are still in the minority, and most savers to still accept ISAs and savings accounts as the only options..

The next mental block is a lack of knowledge in what to buy, how to buy, and where from. While gold has been around for centuries, it remains a ‘new’ asset class to many. The first question novice investors ask us is should they buy gold coins, bars or mining stocks? The options are endless and many feel they don’t know who to ask to get the answers.

While awareness of gold in general is high, many of the people we speak to aren’t aware that certain coins are totally tax free in the UK, or that you can get 40% discount off the price of gold bars as part of a UK pension. That’s not a surprise when so few Independent Financial Advisers (IFAs) discuss alternative assets with their clients. Many of the IFAs themselves weren’t aware that gold bullion could be bought with a pension. This is part of the reason why we started the Gold Adviser’s Program.

When the pension parameters changed in the UK to allow some alternative investments into Self Invested Personal pensions (SIPPs), most of the press focus was on property. At the time buy-to-let properties were the thing to be in, with many modest investors becoming landlords. When residential property was widely touted to be included as permissible SIPP assets press coverage could talk of nothing else. This would mean investors could essentially buy a £100,000 flat at £60,000 once tax relief is factored in. At the last minute the Government performed a U-turn and only allowed commercial property with a SIPP. However by this stage gold had slipped under the press radar as the only commodity permitted into a SIPP. So pension gold really hasn’t been promoted in the UK. When our customers are made aware of the possibility they love the idea.

It’s also true that the average investor doesn’t know the buying process. How do I pay? Where do I store the gold? How do I know it’s real. These are some of the most common questions we receive. If you have the support and expertise of a good gold dealer then these sort of questions are easily overcome. The buying process is as simple for gold as buying anything and once customers buy once they realise there is nothing radical about the investment process. Finally, it’s human nature that investors want to buy at the lowest price and sell at the highest. This is the main investment strategy afterall. So many are put off that gold is at all time highs. They feel they have missed the boat and are unsure of the best timing to get in. As I mentioned at the beginning most experts feel gold has a long way to run yet and starting a relationship with a reputable gold dealer today will help you select the best buying opportunities and get the ball rolling with the new world of physical gold.

In 1993, State Street Global Advisor set in motion Exchange-Trade Fund in the form of SPDR. Subsequently, ETFs gained considerable popularity among investors and attracted a rush of liquidity which is still pouring in to such investments. Being quite similar to mutual funds that already enjoyed popularity at that time, ETFs too became rather one of the most sought after investment choice. Today, not only amateurs, frequent traders and investors also prefer to invest their money in ETFs. All the same, there are many benefits of investing in exchange trade funds for the investors to keep their spirits high for this investment option- Can be Traded like a Stock Exchange trade funds embrace all the best features of stocks. Stock markets are quite unpredictable and the best time to sell might not come back so often. During the trading hours in stock markets, quite often an ETF peaks out and bottoms out, providing traders ample opportunities to trade for profit and keep the investment intact by buying back at the close. ETFs can be traded like equities at market rate during the trading hours; unlike mutual funds that are sold only at day’s closing.

Lower Ratio of Expense Involved

For an investor, an investment option that spends the least and fetches the most is the best. Considering, ETFs are available at low expenditure costs, i.e. around 10 basis point converses to mutual funds that can be bought on expense ratio of 20 basis points, it makes them a viable option for value investors and frequent traders.

Saves on the Brokerage Cost

Because ETFs can be traded through brokerage firms, one can look out for a broker to charges the lowest brokerage fees and expenses on trading of Exchange Traded Funds.

Wide Range of ETFs

ETFs are available in a wide variety which lets an investor diversify their portfolio in various sectors of economy. One can opt for ETFs related to equities, International ETFs, regional ETFs for various markets in Europe, Pacific Rim, Country Specific ETFs to deals in Japan, Australia, UK, and specialized ETFs through which specific industries such as technology, biotech, and energy can be covered.

Tax Benefits

As a cherry on the cake, ETFs are also tax savers as an investor can trade ETFs in large volumes and then redeem taxes at the end. ETFs can also be exchanged with equities to reduce the amount of tax levied on their returns.

Among 60% of Americans who invest in mutual funds, there are hardly any who have a clear picture of what they actually own. Because mutual funds generally deliver a quarterly statement of the current position of the fund, facts remain concealed and the investor is hardly involved in the entire investment process. Disparate of such situation, investors in ETFs enjoy the transparency of the current portfolio position and they can even trade between the trading hours, and not just wait for the closing of a business day to know their place.

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Please visit http://www.comparebroker.com and reveal our hand-picked offerings from Online Discount Brokers, also go through our regularly updated blog section and take informed investment decisions, backed by our in-dept market research.

For some of you, the title of this article might have raised interrogation. After all, how can anyone compare an insurance company business model to an option writing strategy? On a philosophical standpoint, however, there is a similarity.

The insurance company

When an insurance company insures your car or your home, it collects the premium you pay in exchange of assuming the related risk. By selling insurance to a range of clients, it disseminates its total risk while collecting more premiums. And the more risk a client represents, the higher the premium.

As you know, most insurance companies are profitable and have been around for a long time. We assume this business model is probably sound.

The option seller

What is option writing? It’s collecting a premium in exchange of a market risk exposure. On that basis, insurance companies and option writers do have something in common.

Furthermore, the option seller can manage his risk, comparably to the insurance company. Here are a few insights on how:

· Choosing the strike price: it determines the premium received for the risk involved. The higher the premium, the higher the risk. Just like the insurance company collecting more premiums to riskier clients.

· Technical analysis:an essential tool providing better odds to a winning trade.

· Time decay:as an option approaches its expiry date without being in the money, its time value declines because the probability of that option being profitable (in the money) is reduced. For the option seller, time decay is a friend.

· Rolling options positions:When confronted with big upside or downside swings in the market, chances are the option seller might incur more a challenging trading environment. Rolling options may differ this risk. Rolling means moving the strike price of the option to a more suitable level for the trader. Most rolling positions are done in the front month. If near expiry, rolling to a different strike price of the front month will ensure benefiting from a higher time value. Therefore, rolling an option position when important market swings occur may be a good strategy. Since markets have a tendency to retrace their path after a few weeks of oversold or overbought levels, rolling can become a useful tool to improve risk management for the trader.

These four examples demonstrated the risks involved in options writing can be managed trough different alternatives. Just like insurance companies use their own methods of managing their risk.

Conclusion

When writing options, the premium collected in exchange of a market risk exposure is comparable, in some ways, to an insurance company assuming risk for a premium. From a philosophical standpoint, the two approaches are similar. The next time somebody asks you what is option writing, use the insurance company metaphor. It might simplify a concept too often associated with complexity.

At TradetoGain.com, we believe that trading options can give an edge to the overall performance of investors. We also want to educate and expand options trading knowledge to improve your trading skills. Our focus remains on removing emotions from the investment process. Our 10 year performance has shown interesting results. Log on to our website to find out more http://tradetogain.com/returns/

More and more financial experts agree that we may live in the coming years, returns well below historical averages, which are similar to those experienced during the 70s (secular bear).

What to do in such a context? While some advocate the approach of “market timing” to try to outsmart the markets, some more conservative schools of thought show interest on dividends paying stocks.

Why?

Dividends play an important role in long-term performance of a portfolio. This importance is such that since 1926 the performance of the S&P 500 comes to 43% of the dividends! In addition, during the 70s decade when the market was rather neutral, dividends have accounted for 73% of the total return of the S&P 500! That should make you think twice about investing in the next “hot sector “to make you rich.

The choice of good dividends plays is rather difficult. Fortunately, some specialty ETF’s do this job rather well. Here is a list of some of ETF’s in the US and Canada that tracks equity high dividend yielders:

US ETF

iShares Dow Jones Select Dividend (ETF) DVY

SPDR S&P Dividend (ETF) SDY

PowerShares Dividend Achievers (ETF) PFM

Canada ETF

iShares Dow Jns Cnd Slct Dvdnd Indx Fnd (TSE) XDV

Claymore SP TSX Cdn Dividend ETF CDZ

These ETF’s tracks stocks that meet specific criteria’s such as: dividend per share growth, dividend payout percentage rate, minimum average daily volume and a minimum dividend yield.

If you like high dividends, choosing the right selection of stocks that will provide a good diversification might be a difficult task. Not only will it offer a less diversified approach than ETF’s but it might as well be terms of commissions. The easiest approach is just to invest in equity ETF’s that tracks high dividends.

At TradetoGain.com, we believe that trading options can give an edge to the overall performance of investors. We also want to educate and expand options trading knowledge to improve your trading skills. Our focus remains on removing emotions from the investment process. Our 10 year performance has shown interesting results. Log on to our website to find out more http://tradetogain.com/returns/

If you meticulously consider it, the whole idea to any or all investment recommendations comes down to letting you know how to buy at a small enough price tag, and then sell off if the prices look up. Yet somehow, choosing the correct moment, is almost out of the question – specifically during a period similar to this past year when trading markets were on a ride – going into an abyss. And even the traditional mutual fund market, had such a difficult time discovering the right times to purchase and sell a year ago, they actually did more poorly compared to Standard & Poor’s index benchmarks. And it weren’t just for last year either; this is the manner investing in mutual funds and stock markets ends up, if you would analyze it for a particular period of time. It has been like they let you know about some establishments – the house will win in the long run.

The reason why things turn out so badly, is always that, the investment in stock exchange trading (as well as most mutual fund overseers) is mostly managed by either a novice investor or a myopic professional whose formulae is not exceptional; and there is almost nothing technical about how an beginner investment process will go about its operation. People like that love to buy stocks like they buy cars – if it make them look good, and the guys also have it, is it still a bad thing then? They most likely haven’t got word of investment advice from the careful investors, that recommends investment practices just like asset allocation. These do sound kind of intimidating, but give it a listen, and you’ll know that just about anyone could swing these.

These difficult terminology truly just suggest this: invest regularly in so many different kinds of companies and stocks, that poor results in no one area will stick it to you that hard. A thoroughly varied holding of bonds, stocks and real-estate that take the counsel of all kinds of well-known indexes, is how you’re expected to place your cash. What individuals do normally, is, when they see something going up, they hold out for some time to make certain that it does keep going up, and then they’re buying: once the stock is near to topping out. After which when prices fall, they wait some time to make certain that it is actually heading downward, and sell when it is near its individual worst at a contest to the floor. This frequent investment method is about momentum. And when you consult your buddies about what to purchase, and never an analyst, you often have smart investing advice similar to this.

A non-intuitive (but beneficial) item of investment advice you should consider is the one which requires you to put money into stocks which are at their worst. In case you are investing for the future, normally it’s things that are doing their worst at this time, thatstand the best potential for improving. Within reason. As perverse as this seems, it does work. What happens in real life whenever you try this kind of smart investing advice. There are many investment corporations such as Vanguard, that attempt to do just this, and their mutual funds are actually hardly affected by the economic downturn. I really found that positioning your hard earned money in a mutual fund that invests half in stocks and bonds, gets you close to an 8% return annually. Being a little bit more leaning to the stocks, generally brings you an improved gain. In an monetary environment where folks are suffering heavy loses, this appears to be decent.

Ellie Berg is a keen internet marketer and is also an avid writer who writes on various subjects. Come visit her latest website that discusses Smart Investing and helps savvy individuals find the best Smart Investing tips to make the most of their money.

Worldwide, Binary Options grows and are becoming more popular these days. This is due to a simpler and fewer risks in investing. It also covers a low capital investment for people who want to start the trading business.

Let us look into some of the Binary Options guides to have a more profitable trade in the foreign exchange market.

The difference between the traditional and binary is the traditional is usually for a long term investment process. While for the binary trading, it has a short term trading process. So the profit can be easily withdrawn without waiting for a longer time.

Fores binary options trade pays out a 60 to 81 percent and a percentage return loss will sum up to 15 percent of one’s investment. This is not bad for an investor because there is still a return in profits.

Although this is a simple trading strategy, proper knowledge of the options in binary trading is a must to be successful. Be acquainted with the terminologies, trending prices and patterns of your chosen investment.

When starting the chosen trade, pay an extra attention and effort to monitor it for about a week or two to determine the capabilities of the chosen asset. Be aware because time is of the essence when working out this kind of business.

Because time is of the essence, there are hourly and daily basis for binary trading. The best time to do it is the hourly expiration time. This is to optimize the time for lesser chance of fluctuating prices.

There are two types of trading options, the American style and the European style. The American option is automatically in effect when the peak amount of price is occurring. The European style which is the most common in trading options is done when the strike amount is estimated at the expiration date.

Binary trading options don’t need a genius in the trade. The important thing is to monitor properly and know the fundamentals of currency exchange. It is all about predicting the trading market by two ways. The call or put option only.

To “call” the price determine if the predicted price will go up and if the price will go down, better bet for “put”. It is simply choosing between black and white or cash in or cash out.

There are options that have bonuses and promotional goodies for investors. Choose the right one for you and be sure that it is reliable and profitable. IF for example you invest in that asset trade, your $50 capital may double if you invest in them.

Another advantage of this kind of trading option is you do not have to wait for a long time for your investment to mature and gain profit. Within an hour or a day, you will double the amount on what you have invested.

Keep in mind that this trading design is to help you gain profit. If you want this kind of investment, be prepared and get the proper information on how does it work for you. You should also have the confidence and the guts to succeed.

Binary Options can be an ideal complement to traders who enjoy trading in forex markets and are looking to expand their trading “tool kit” into binaries, gaining exposure to additional markets such as shares and commodities. Get started today http://www.binaryoptionslive.com

According to a report by the Angel Capital Education Foundation (ACEF) the angel investment process is typically comprised of 4 steps. It is important to know and understand these steps in order to successfully secure angel investment. According to the ACEF report only between 1 and 4% of entrepreneurs that apply for angel investment funding will make it through this 4 stage process to receive an investment. The 4 steps are as follows:

Investor Presentation Round – If you are luck enough to make it to the second round you will typically have the opportunity to meet with at least one of the angel investors that may make up the angel investor network. You will probably be asked to prepare a short presentation and then they will have an opportunity to ask questions. If you want to know how to make a powerful investor presentation I suggest reading Guy Kawasaki’s book, “The Art of the Start.” About 1 out of 3 will make it to the next round.

Due Diligence Round – This is the third, and probably the most intense round. At this point the investors are going to want to know everything there is to know about you and your business. Be prepared to answer lots of questions and provide the potential investors with a detailed business plan. If you have nothing to hide then this round should be a breeze. Only about 1 in 3 entrepreneurs will make it out of this round alive and move on to the final round.

Investment Round – This is the final round. You have made it through the executive summary round, the initial presentation round, and the due diligence round. Congratulations. Now you have about a 50/50 shot at receiving funding. You will probably be asked to come back in for a final investment presentation in front of the entire angel investor network. Sounds terrifying. If you are well prepared this round should be a breeze. The potential investors clearly have an interest in your business because they have brought you this far. Now this is your chance to get them to buy in to your vision and also to show them how they will make a lot of money of course.

Executive Summary Round – This is the first stage of the angel investment process, also known as prescreening. Many angel investor networks will have a executive summary submission tool on their website, or at least an email for you to send initial applications for funding. This is probably the most important round because if you don’t pass this round you will not have the opportunity to meet face-to-face with the potential investors. Only 25% of applicants will make it through this round. For this reason, your executive summary is absolutely vital. Make sure to read this extensive guide on how to write an executive summary at: http://www.squidoo.com/how-to-write-an-executive-summary

This 4 round process is intimidating to most entrepreneurs and for 96 to 99% of business owners it ends in failure. If you get turned down once, don’t let that get you down. There are literally hundreds of thousands of angel investors across the country and you just might be able to find the one that will take your vision and make it a reality.

Hey! My name is Adam Hoeksema. I am the Client Services Manager at a technology based small business incubator. If you are working on an executive summary for your business plan, make sure to go to my website at http://www.theexecutiveplan.com and download my special report on how to write a powerful executive summary.

Introduction
The bottom line of every business is controlled by finance. The strength of finance includes control of the future of all the employees of a certain company. There are diverse aspects of investment controlled by finance. A company’s cash flow management is based on its investment policies. A proper financial investment helps a company in maintaining a perfect balance in the cash flow such that there is no sudden deficit that could lead to hazardous results. Financial investment in a planed manner has a role to control the investment, insurance and risk management issues of a company. These together contribute towards economic success.

Risk, Rate and Diversification
Before one goes through the deep features that are included in financial investment, it is required to understand the concept of risk. There are basically two different meanings that are given to risk. It could either be considered as loss of a certain portion of the capital investment or not enough profit as compared to the assets at stake. It is impossible to eliminate risk entirely. It can be reduced by diversifying the business. The intelligence lies in managing the risks such that if taken in the short term, it produces a long-run benefit. One should manage risks such that it lies well-within the context of the aimed goals. (The Daily Angle, 2009)

The next important part of investment is the rate of return. It is often believed that the more a person takes risks; the higher would be the rate of return. Whenever there is greater amount of security that comes from lower amount of risks, it becomes more suitable for the risk avert investors. This is termed as risk/rate trade off.

The third most important part of investment in finance is in terms of diversification. It is a reality that if a company deals in just one sort of business, there is a higher probability of failure. If the same company has many forms of business, then one form can certainly counteract the other. This is the benefit of diversity. Diversification in business can be adopted in the following ways:

• Across asset classes
• Across markets and regions
• Across investment management styles

Factors of Successful Investment

• One would have to decide the appropriate time as to when to sell a fixed-interest investment. If a person sells the same before the time of maturity, there are chances for the rate of interest to fall within the period of holding the investment. If this happens, the seller could enjoy a profit on the original investment.
• At the same times, if the interest rate rises during the time of investment, then there are chances that the seller would receive a lower amount as compared to the amount he could have received at maturity. This would therefore result into a loss.
• Another important factor that the investor must keep in mind is that the way a form of maturity or bond performs in the market would be different for different bond or maturity based on the economic conditions of the market. There could be arise but at the same time a fall too. (Vong, 2006)

Sources of Finance

Internal Sources

Personal Savings: In this form of financial sourcing, a businessman invests money in his own business. A substantial amount is used for running one’s own business.

Retained profits: In this form of sourcing, a businessman doesn’t use his money but saves it. These profits are termed as kept by the accountants and not spent.

Working Capital: The daily expenses that are accounted in the firm are termed as the working capital. This includes stationery, rent, wages etc. The working capital can also be defined as the difference between the assets and the current liabilities of a company.

Sale of Assets: This form of financial sourcing is required when the business is in desperate need of cash. At this point of time, the only alternative left for the company is to sale some of its fixed assets as they do not provide any revenue and use it in the development of the business. (Radcliffe, 2005)

External Sources

Ownership Capital:

Ownership refers to those businessmen who are shareholders. This occurs in a limited liability company as the partners and the owners of businesses are not holders of shares. There are two types of shares:

Ordinary Shares: These are those shares that are issued to the owners of a company. These shares can be entitled to dividends once a fixed amount of profit has been made or after a certain date. The ordinary shareholders can put funds into the companies through their respective retained profits. This might not bring in large amount of funds but it is preferable as a low-cost source of finance. The ordinary shareholders can also put their funds by paying for a new issue of shares. This is efficient when a company is in the growing stage.

Preference Shares: These are those shares which have a fixed percentage of dividends even before the ordinary shareholders receive any amount of dividends. It can be advantageous as these dividends are not required to be paid in those years when the profit has decreased substantially. There are no voting rights associated with these shares so there is total control of the shareholders. It does not put any restriction in the borrowing power of the company. (Brigham, 2004)

Non-Ownership Capital:

Debentures: These are the raised capital of a company in the long-term for which interest is paid under a written acknowledgement. They can be advantageous when the interest rates are volatile in nature. The coupon rate of debentures can be changed according to the fluctuation in the market rates.

Bank-Lending: These are the most important forms of financial sourcing. These are generally for a shorter period of time but at times they can also be taken on a medium-term basis. In case of short-term lending, the companies are required to keep an overdraft which is given by the bank and the interest is charged accordingly on the given amount. This is generally done for a period of three years or less. The medium-term lending is done on a three to ten year basis. This sort of lending is done for the larger companies according to a set margin depending on the riskiness and credit-standing of the borrower.

Leasing: In this form of financial sourcing, there is an owner of an asset who allows another person to use it. Here, the user is responsible for the equipments granted. (Metrick, 2006)

Terms of Investment in Finance

Opportunity Cost

Opportunity cost gives the best possible alternative that could be considered in making the investment decisions of a company. The basic principle of economics is to consider the resources as scarce. Under the situation, opportunity costs refer to that cost which makes sure that there is optimum utilization of the resources. Let’s say a company invests a sum of 5,000,000 ADE in the training and research programs, then its effectiveness can be measured when the company analyses the consequences of spending the same amount in some other operational cost. So, before accessing the rue cost of any financial decision, calculation of opportunity cost is a fundamental.

Net Present Value (NPV)

The value of inventory changes for a company gradually over a certain period of time. The net present value is the actual present value derived from the cash flows over that period of time. It includes a specific discounted rate which is according to the rate at which the capital needed for a certain project could be returned. So, NPV is the total value that a particular investment in the firm adds value to that firm. If it is greater than zero, it is accepted or else rejected.
Internal Rate of Return (IRR)

IRR gives an indication of the quality of the investment. It tells the company whether they should make the investments or not. So, a good IRR indicates that a particular project gives a better yield as compared to the alternative investments. In general, IRR should be larger than the cost of the capital for adding value to a company. (Wilmerding, 2006)

Discounted Rate of Return

The discounted rate of return gives the expected rate of return of an investor from an investment.

Roles of Investment in Finance

Strategic Role: The strategies with respect to the investment in finance are based on its objectives. The strategic role of financial investment is to ensure that the policies implemented by the company eliminate all those elements that have no contribution to the financial success of the company. A company should plan its financial strategies in such a way that they are not only opportunistic in nature but also practically feasible. They are bound to avert risks to the maximum. A proper dissemination of the policies of a company is also a part of the strategic role of the financial investment. This keeps the employees on track of the financial restrictions of the company.

Operational Role: The operational role of the financial investment process is to restrict the company members from crossing the boundaries of financial distress. The operations should provide a platform for the future planning of the company. This is more prominent with maximum involvement of the manager. Another important role of the financial investment is the training of the members of a company to live up to the financial requirements of the company. This includes the budgeting process and the methodologies involved in maintaining the cash flow. All the assets and the debts should be managed as a part of the operational role of the financial investment. So, much of the balance sheet of a company owes its being to the operational role of financial investment.

Responsibilities of Investment in Finance

The financial investment of a company is bound to affect the stakeholders. A company lives on the expectations of many of its stakeholders. Even during tough financial times, the company should make sure that it is able to meet the stakeholders’ expectations. This has an adverse affect when the prices of the shares of an organization suddenly lower. A stakeholder would invest in a company when he is confident of the fact that the investment in the company would not let the prices go down. A company should therefore have a risk calculated amount that helps it in these periods. (Lerner, 2008)

I am a pre final year student at the Indian Institute of Information Technology and Management, Gwalior, India pursuing a five year integrated course (dual degree) leading to the award of B.Tech (Information Technology) and MBA. I am currently in the 9th Semester. ABV-IIITM Gwalior, a Deemed University, is an apex Institute, established by the ministry of HRD (Human Resource Development), Government of India.
The competitive environment at my Institute coupled with my inherent trait of trying to learn something new from each experience has made me come a long way in these four years. I have not only learnt to work under pressure and intense competition with some of the brightest students in the country but have also worked with an esteemed KPO called CBI Solutions in the meanwhile. This has given me the experience to get exposed to some of the most challenging marketing traits in the business. Moreover, I have been awarded first rank for IT and Entrepreneurship at the end of my 7th Semester.
I have been privileged to work at Polaris Retail Infotech Limited, Gurgaon from May to July’08. This taught me the practical application of relationship marketing as I saw the preparation of customer interfaces through their software Smart Store. This is visible at billing counters at retail stores of the fame of Shopper’s Stop. Also, I’ve been in the editorial board of my college magazine, La Vista for the past 3 years and eventually I hold the responsibility of the Chief Editor.