The Theoretical Aspects Of Investments

Decision Making Area 3:Investment Decisions * Table of Articles * Summary of Articles * Observations * Conclusion

For example, if expected earnings is good, the stock price will be driven up and then sold after earnings announcement because the stock value is believed to have already achieved the maximum point. Investors usually do not receive any of the company’s profit even if they are the shareholders of that company. In some cases, an investor on the big company will be able to receive some of the company’s profits called dividend. However, this does not apply to all companies because they want to obtain their high profits in order to be able to pay for future growth; this is called keeping cash in hand. Some investors have preference over another, some are more interested in receiving dividends than in growth of the company. So the choice of investment will entirely depend on your goals.

“ Investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future.”

So the investor will invest 32.58860806% of the investment budget in the risky asset and 67.41139194% in the risk-free asset.

Motivations for investing differ from motivations associated with gambling. Both motivations depend on psychology and traits of individuals. But mainly Gamblers are motivated by just the thrill and excitement in it. While Investors have different take depending on their discipline, an investor could enter the stock market for speculation or for buy and hold stock investment.

Over time there have been many different theories applied to financial markets which attempt to explain the changes of stock prices and the different trends over time. Investors would often debate whether or not the market is efficient. Put simply, whether or not the market is a reflection of the information made available to the investor at any time. One such theory that attempts to explain the movements and trends of a market is the Efficient Market Hypothesis (EMH). This particular theory was advocated by Professor Eugene Fama back in 1970 and is regarded as the most widely used investment theory. The EMH states that the stock market is informationally efficient where all stocks are accurately priced based on their investment properties and all investors equally possess the knowledge of these properties. The EMH also states that no investor within the market is able to achieve incredible market returns due to the fact that stocks are always priced at their fair value. However, considering the likes of Warren Buffet and his success, this idea doesn’t seem to be true. Therefore, the EMH is considered by many to be fairly inaccurate theory that shouldn’t be applied to financial markets. There can be a lot more said about the EMH however, this article, as I hope you have noticed by now, is to do with fractals. So now let’s look at an alternative theory that investors may prefer to utilize. This theory

Capital investment decisions that involve the purchase of items such as land, machinery, buildings, or equipment are among the most important decisions undertaken by the business manager. These decisions typically involve the commitment of large sums of money, and they will affect the business over a number of years. Furthermore, the funds to purchase a capital item must be paid out immediately, whereas the income or benefits accrue over time. Because the benefits are based on future events and the ability to foresee the future is imperfect, you should make a considerable effort to evaluate

Deciding whether to invest or not is a complicated task for today’s companies. Managers need to make thorough studies, analysing additional costs and revenues, in order to be able to make the most reasonable decision. A big investment implies a great expenditure and, generally, a late return. If a company does not consider thoroughly the requirements and the outcomes of a particular investment, the organization may suffer a big loss and even be severely prejudiced.

For those Millennials who are entering the workforce, there is a pressure on paying off high amounts of debt and lacking the knowledge to make smart investment decisions. An article by Larson, Eastman, and Bock (2016) explains that Millennials entering the workforce are presented with difficult financial decisions. They also could possibly make financial mistakes during this time that could be costly for their future (Larson et al., 2016). Millennials may not be able to depend on pensions or Social Security to fund retirement so the importance of saving is crucial during their younger years. They found from prior research that there are differences in how the millennials view investment decisions compared to other generations. They were more risk adverse and conservative than others and this could by why they are not wanting to save for retirement. The lack of knowledge about investment decisions could also by why they are not saving enough during their working years. Older generations keep their savings in cash and less in stocks and most millennials do not carry much cash and some are risk adverse to keep their cash in stocks. Through their three studies, they tried to understand the relationship of financial knowledge and risk on retirement investment decisions. After their study, they found that millennials chose highly conservative retirement plans and those individuals had low degrees of knowledge about finance. Also, their findings showed

If the potential costs of investment are shared between worker and employment, they both share costs and benefits of the firm-specialized training. The worker benefits because their initial earning potential is higher comparatively to the rest of the similar general training market workers; the worker also benefits in having job security or retained employment with the firm. But if the worker leaves, the potential costs fall to both the firm and the worker because the worker cannot carry his training elsewhere to another firm and the firm loses a trained worker and investment of time and money, and now must expend cost toward another worker’s training. The worker also must keep in mind that his earnings could remain stagnant while generally trained workers will eventually increase their earnings in the competitive market. Firm specific training is often paid for by the employer for firm-only knowledge and training or can be dually invested by worker and firm; however, it is not transferable among the market. While, highly specialized training is concentrated within the market and only few are trained, specialized, and knowledgeable in the industry or field. Training and investment for firm-specific training can be risky for the employer and the worker while in this worker-employer relationship the potential benefit is mutual only if the worker retains his employment with the firm who trained the worker. The highly-specialized training could be costlier in comparison to

Our company has a preference to invest in companies that are already established but are still fairly early in a product lifecycle evolution. This may include products that have already been designed and tested but have just recently been introduced into the market or will be introduced in the near future. This may also include products or services that have proven local or regional success and looking to begin national expansion. The company's resources can help entrepreneurs market their products and develop the appropriate distribution channels that will be necessary to gain more market share.

In the short run, the firm can only change its variable input to change its output and profitability. In the long run, the company can indulge in R&D to reduce the cost of production. If it can innovate any cost effective method of production, then the firm can enjoy a cost advantage over the other firms.

“Our investment depends on the market trend. For example, we used to pay attention on entertaining start-ups. Later on we identified the opportunities of B2B start-ups, then we turn the sights towards B2B firms. Market comes in waves, and we move according to the market trend.”

Fourthly, you might need to invest certain amount of money in order to achieve good results, and

An investment also known as a security is a pledge of money from an individual, government, or cooperation that is expected to accrue additional wealth on top of its original dollar amount. An investment can be a long-term or short-term obligation depending on the investor’s goals and/or assets they choose to invest in. The investment decision process is a two-step process which is necessary to make a sound trustable and efficient investment. The first step involves an evaluation of the investment you as the investor are interested in committing money towards, including characteristics of the security (i.e. how it acts in the current market, how the current/future market may react to this investment and possible returns on your investment). Finally, the management of your investment portfolio, including how often it should be revised, how the performance of your securities should be measured (how often they should be measured), and other important aspects of your current investments. Investing revolves around one basic concept, improving our future, investors invest money today to improve their welfare in the future which is why understanding what an investment is and the process of decision making before investing is extremely important.