An Introduction to Bond and Cash Investing | Investing

As a new investor finding the right investment choice for you is something that can and should take you quite some time. There are a lot of options available to you and you shouldn’t rush into anything you aren’t comfortable or something that you aren’t fully informed about. Knowing what you are getting yourself, and your money into is half the battle.Something you should always consider when starting out in investment is exactly how much risk you are willing to take. I highly recommend that you take the time to consult with a financial advisor when making this or any other similar decision.Okay now we have got through that quick warning and introduction I’m going to run over two low risk investments classes, cash and bonds.Cash investments in general are a very safe investment, it’s in a low risk asset class. Therefore, normally, any investments in cash will very rarely see any kind of fall through the investments term. However, in exchange for such good security they tend to offer a very low return rate compared to other kinds of investments.

With cash investments it’s quite common for their rate of inflation to be running higher than the original deposit rate, this is caused by their low rate of return. It’s situations like this although the value of cash itself won’t fall, the actual value and purchasing power will decrease leading to negative returns.The real advantage of a cash investments is that they are normally the most liquid form of investment, therefore they are very easily accessible. Normally cash investments are used to provide you with an emergency funded as well as a normal day to day fund. The majority of cash investments are completed directly through banks using normal current accounts.Now onto bond investments. Bonds are normally considered medium to low risk investments depending on the kind of bond you chose to invest in. Although this is true for most bonds that you come across their are still bonds that carry a high risk so take your time to analyse the bond you are looking to invest in before make a choice.To round off this article I will give you a quick overview of what a bond actually is and how they can be great investments. Bonds are basically a loan from you to something like a corporation, government body, or any other similar kind of organisation. These are referred to as the issuer, they offer out bonds that have a set interest rate. Investors will they be paid a set amount of interested periodically until the bond reaches maturity, at which point the investor will be paid the original cost of the bond.

The main risk factor you have to remember when dealing with bonds is the rising and falling of interest rates. Interest rates can either make or lose an investor money. If interest rates were to rise after you were to invest in a bond then the price of your bond (if sold rather than left to mature) would fall due to the fact people could get a bond for the same price that paid more in interest. This does however, work in reverse. If interest rates fall your bond will be able to be sold for more than it original value.

The Basics Of Institutional Investment | Investing

Investors or investment funds that do not belong to the country in which they are currently investing are called foreign institutional investors. Such investors are from another country, or are registered in a country outside the country in which the investing is being done. Insurance companies, mutual funds, hedge funds and pension funds are all examples of institutions that are involved in foreign institutional investments.Institutional investors are companies that collect and invest large sums of money, into assets like securities, property and other such investments. Operating companies that choose to invest a part of their profits into such assets are also called institutional investors. There are six basic kinds of institutional investors. They are pension funds, endowment funds, insurance companies, commercial banks, mutual funds and hedge funds.

They perform the duty of highly specialized investors acting on behalf of others. For example, let’s say a salaried individual will get a pension from his employer. The employer hands that employee’s pension contribution to a fund. The fund uses the pension amount to purchase shares, or another kind of financial product in a company. Such funds are valuable because they have a vast investment portfolio in numerous companies. The benefit of this is that the risk gets spread. This means that if one company fails, only a very minor part of the entire fund’s investment will be at stake.Investments made through institutional investors have a number of benefits for a retail investor. These benefits are:• The investments are able to influence the solvency of a company.
• An investment by a large institution acts as an anchor investment for other institutions to invest in that particular company/stock, thus increasing its value.
• The institutional investments are safer as there is a wide range of domain knowledge used before making such investments and also such investments are diversified into several companies or asset classes.
• The risk of such investments is not as high as that of investments made by non-institutional investors, as the investment portfolio is vast and diversified. In case of corrosion in value of one asset class, the entire corpus would not be greatly affected.
• The corporate governance is better enforced by institutional investors.

A lot of institutional investors are very interested in private equity as an asset class. This is because private equity has promising benefits in terms of diversification. The returns of private equity can be higher than that of other investments, but they are also more risky and are high beta investments. Institutional investors usually carry out very different and varied investment strategies for private equity. Because of the high level of market confidentiality as well as the limited amount of academic scrutiny, not much is known about the performance and basis of these investment strategies.