The meaning of investment

Source: Wikipedia

Investment has different meanings in finance and economics.

In economics, investment is the accumulation of newly produced physical entities, such as factories, machinery, houses, and goods inventories.

In finance, investment is putting money into an asset with the expectation of capital appreciation, dividends, and/or interest earnings. This may or may not be backed by research and analysis. Most or all forms of investment involve some form of risk, such as investment in equities, property, and even fixed interest securities which are subject, among other things, to inflation risk. It is indispensable for project investors to identify and manage the risks related to the investment.

To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future.

In finance, the benefit from investment is called a return. The return may consist of capital gain or investment income, including dividends, interest, rental income etc., or a combination of the two. The projected economic return is the appropriately discounted value of the future returns. The historic return comprises the actual capital gain (or loss) or income (or both) over a period of time.

Investment generally results in acquiring an asset, also called an investment. If the asset is available at a price worth investing, it is normally expected either to generate income, or to appreciate in value, so that it can be sold at a higher price (or both).

Investors generally expect higher returns from riskier investments. Financial assets range from low-risk, low-return investments, such as high-grade government bonds, to those with higher risk and higher expected commensurate reward, such as emerging markets stock investments.

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

Gold as an investment

Source: Wikipedia
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives. Gold price has shown a long term correlation with the price of crude oil. This suggests a reason why gold is sold off during economic weakness.

Business term of the day - Term for October 24, 2013: "Critical path method"

The critical path method (CPM) is an algorithm for scheduling a set of project activities. It is an important tool for effective project management.

The critical path method (CPM) is a project modeling technique developed in the late 1950s by Morgan R. Walker of DuPont and James E. Kelley, Jr. of Remington Rand. Kelley and Walker related their memories of the development of CPM in 1989. Kelley attributed the term "critical path" to the developers of the Program Evaluation and Review Technique which was developed at about the same time by Booz Allen Hamilton and the U.S. Navy. The precursors of what came to be known as Critical Path were developed and put into practice by DuPont between 1940 and 1943 and contributed to the success of the Manhattan Project. Read more...

Business term of the day - Term for September 23, 2013: "Creeping normality"

Antique bronze ring with ruby for women

Source: Wikipedia
Creeping normality refers to the way a major change can be accepted as the normal situation if it happens slowly, in unnoticed increments, when it would be regarded as objectionable if it took place in a single step or short period. Examples would be a change in job responsibilities or a change in a medical condition.
Jared Diamond has invoked the concept (as well as that of landscape amnesia) in attempting to explain why in the course of long-term environmental degradation, Easter Island natives would, seemingly irrationally, chop down the last tree:

Gradually trees became fewer, smaller, and less important. By the time the last fruit-bearing adult palm tree was cut, palms had long since ceased to be of economic significance. That left only smaller and smaller palm saplings to clear each year, along with other bushes and treelets. No one would have noticed the felling of the last small palm.

Business term of the day - Term for September 20, 2013: "country-of-origin effect (COE)"

Gitan earrings for women

Source: Wikipedia
The country-of-origin effect (COE) is a psychological effect which occurs when customers are unfamiliar with a product (e.g., product quality) and the image of the product's country of origin has a "halo effect" on the customers' evaluation of the product.

The country associated with the product may be the country of the producing company's headquarters, the country of manufactory or assembly, the country of product design or the country associated with the brand name. A positive country image may allow marketers to introduce new products while quickly gaining customer recognition and acceptance. However, products made in developing countries are only marketable when they are offered at a far lower price than products offered by regional or global competitors, implying a negative country image and a negative country-of-origin effect.

Country-of-origin effects have no inherent intertemporal stability since country images may change. This is the case when customers become more familiar with the country, the marketing practices used to market the product improve, opr when the perceived quality of the products improves. One example of a change in a country image is the changing image of cars made in Japan which significantly improved during the second half of the 20th century. When customers become more knowledgeable about a country's products, the country image has less influence on the formation of those customers' beliefs about product and brand attributes. Also, demographics have considerable influence on the country-of-origin effect as the effect has been shown to have a particularly strong influence on the elderly, less educated, and politically conservative. Finally, country-of-origin effects are dependent on the category of the product due to country-of-origin effects being more relevant for "performance products" like cars or consumer electronics and less relevant for cosmetics or designer clothes.

Business term of the day - Term for September 19, 2013: "Country risk"

Keywords: country risk

Source: Wikipedia

Country risk refers to the risk of investing in a country, dependent on changes in the business environment that may adversely affect operating profits or the value of assets in a specific country. For example, financial factors such as currency controls, devaluation or regulatory changes, or stability factors such as mass riots, civil war and other potential events contribute to companies' operational risks. This term is also sometimes referred to as political risk; however, country risk is a more general term that generally refers only to risks affecting all companies operating within a particular country.

Political risk analysis providers and credit rating agencies use different methodologies to assess and rate countries' comparative risk exposure. Credit rating agencies tend to use quantitative econometric models and focus on financial analysis, whereas political risk providers tend to use qualitative methods, focusing on political analysis. However, there is no consensus on methodology in assessing credit and political risks.

Why Occupy Wall Street fizzled

Stainless steel ornate cat eye ring

The Occupier, Mark Bray, said the movement "was about creating a vision of a different world. A world where people actually have their needs met. A humane society."

That was certainly the general goal when Occupy Wall Street kicked off on September 17, 2011. CNNMoney was one of the few news outlets present for Day 1, when a few hundred protesters descended on the ultimate symbol of American capitalism: Manhattan's financial district.    
Read more...