What is Economic Investment?

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In finance, the benefit from investment is called a return.

. The return may consist of a profit from the sale of property or an investment, or investment income including dividends, interests, rental income etc., or a combination of the two.

The projected economic return is the appropriately discounted value of the future returns.

Investors generally expect higher returns from riskier investments. When we make a low risk investment, the return is also generally low.

Investors, particularly novices, are often advised to adopt a particular investment strategy and diversify their portfolio. Diversification has the statistical effect of reducing overall risk.

An investor may bear a risk of loss of some or all of their capital invested, whereas in saving the risk of loss in the value that is stated on a coin or note is normally remote

Investment in stocks, property, etc.

in the hope of significant gain but with the risk of significant loss, i.e. speculation, involves a level of risk which is greater than most investors would generally consider justified by the expected return.

An alternative characterization of speculation is its short-term, opportunistic nature.

In the early 1900s purchasers of stocks, bonds, and other securities were described in media, academia, and commerce as speculators.

By the 1950s, the term investment had come to denote the more conservative end of the securities spectrum, while speculation was applied by financial brokers and their advertising agencies to higher risk securities much in vogue at that time.

Since the last half of the 20th century, the terms speculation and speculator have specifically referred to higher risk ventures.

The Code of Hammurabi (around 1700 BC) provided a legal framework for investment,

establishing a means for the pledge of collateral by codifying debtor and creditor rights in regard to pledged land. Punishments for breaking financial obligations were not as severe as those for crimes involving injury or death.[1]

A value investor buys assets that they believe to be undervalued (and sells overvalued ones). To identify undervalued securities, a value investor uses analysis of the financial reports of the issuer to evaluate the security.

The price to earnings ratio (P/E), or earnings multiple, is a particularly significant and recognized fundamental ratio, with a function of dividing the share price of stock, by its earnings per share.

An instance in which the price to earnings ratio has a lesser significance is when companies in different industries are compared.

For example, although it is reasonable for a telecommunications stock to show a P/E in the low teens, in the case of hi-tech stock, a P/E in the 40s range is not unusual.

The act of placing capital into a project or business with the intent of making a profit on the initial placing of capital.

An investment may involve the extension of a loan or line of credit, which entitles one to repayment with interest, or it may involve buying an ownership stake in a business, with the hope that the business will become profitable.

An investment may involve the extension of a loan or line of credit, which entitles one to repayment with interest, or it may involve buying an ownership stake in a business, with the hope that the business will become profitable ok all of you .................