How Do I Invest In The Environmental, Social, And Governance (esg) Sector? – Learning Objectives Understand the meaning of the term investment and list the characteristics that distinguish one investment from another. Tell us about the investment process and types of investors. Tell us about the main types of investments. Describe the purpose and content of the investment document, consider important tax implications and discuss lifetime investments. List several types of short-term funds. List some of the major jobs available to people with financial skills and the role that investment plays in each.
The goal of investing is to multiply your money to achieve long-term financial goals. Investment: Any asset that can be invested in the hope that it will bring good returns and/or add value to the investment process.
How Do I Invest In The Environmental, Social, And Governance (esg) Sector?
Investment Attributes Securities or real estate Securities: financial assets such as stocks, bonds, and options that represent a claim on the resources of the issuer Liquidity: the ability to buy and sell quickly Property: real assets that are generally less liquid than securities Real . property: permanently attached to land, such as land, buildings and equipment. Tangible personal property: such as gold, artwork, antiques and collectibles.
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Signs of investment Debt, equity or derivatives Debt: investor lends money in return for interest and future payments on debt (bonds) Equity: existing ownership of a business or real estate (common stock) Derivatives: no debt or equity; deriving value from the underlying asset (option) Low or high risk investment Risk: uncertainty about the return that the investment will bring Low risk: high predictability, low average return High risk: unpredictability, high average return Diversification: type of ownership different assets in the investment portfolio
Investment characteristics Short or long-term investment Short-term: maturity of one year or less Long-term: maturity of more than one year Domestic or foreign Domestic: securities issued by domestic companies Foreign: securities issued by foreign companies.
Types of Investment Plan Investors and Investors Real Estate Other Borrowers (house, car) Typically Investors Federal, State and Local Government Projects and Operations Typically Investors Investors: Invest in the production of goods and services.
An investment practice that brings buyers and investors together. Markets: Markets in which investors and investors trade financial assets, often through intermediaries such as stockbrokers and dealers. Financial Institutions: Institutions such as banks and insurance companies. companies, collect the resources of investors and use these funds to give loans and invest in securities issued by investors.
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The investment process Types of investors Individual investors: people who manage their money to achieve their financial goals. Professionals who make a living managing other people’s money Professionals who sell large amounts of personal debt, as well as businesses and governments. These include banks, life insurance companies, mutual funds, pension funds and hedge funds.
12 types of investments Investors have a wide choice of investments to achieve their investment goals. Short term investments Common stocks Fixed income securities Mutual funds Exchange traded funds Hedge funds Derivatives Other popular interests.
Investments with maturities of 1 year or less and low risk US Treasury bills Provide high liquidity Common stocks Represent an ownership interest in a corporation Return is provided through dividends and income Fixed income securities Bonds are long-term fixed income securities issued by corporations and governments. Convertible securities are special bonds that can be converted into shares.
An active or conservative portfolio of securities created by pooling the money of many different investors. Allow investors to create different portfolios without investing a lot of money. Money market investment funds or investment funds are investment funds that invest only in short-term investments. Exchange-Traded Funds (ETFs) Like mutual funds, except that ETF shares are traded on an exchange, so investors can buy and sell any time the exchange is open for business. and less regulated than mutual funds
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The value of securities is determined by the underlying asset (such as stocks or commodities). Includes options and futures contracts. Options: a security that gives an investor the ability to sell or buy another security at a specified price at a specified time. . Futures: Legally binding contracts that specify that the seller of the futures contract delivers and the buyer of the contract takes delivery of the asset at a specified time and at an agreed upon price at the time the contract is sold.
Tax Advantaged Investments: Investments that offer a higher after-tax return by reducing the amount of taxes that must be paid. Municipal bonds Real estate: real estate such as residential buildings, green land and income (warehouses, office and apartment buildings, and condominiums). It can be returned in the form of rental income, tax credits and income. Wealth: investment assets other than real estate that can be seen or touched. Bought for a price increase. Gold or other precious metals Collectibles
Creating a well-thought-out investment plan that encourages you to take a more ethical approach to money management will help you avoid many common investment mistakes. A good investment plan is a reminder of your goals and a strategic plan to guide your investment decisions throughout your life. Drafting an investment policy statement. Accounting for personal taxes. Investing for life. Investment during the business cycle.
Writing a financial report. when choosing and looking at money
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Considering Personal Taxes Main Sources of Taxes Federal, State and Local Income, Sales and Property Types of Income The three main types of income are: Active income: income from work (salary, wages, pensions) Paper income: income from investments (interest) . , dividends, capital gains) Passive income: income from significant investments (rents, royalties, limited partnerships) Taxed at a progressive rate (rates increase as income increases)
21 Table 1.2 Federal income tax rates and brackets for individual and joint returns (as of April 15, 2015)
Profit and loss including individual taxes. Property, plant and equipment: assets owned and used by the taxpayer, including securities and personal residence. Capital: proceeds from the sale of real estate, plant and equipment, the value of which exceeds the original purchase price. Fixed assets are treated as less than one. year: regular tax rate Property held for more than one year: 0%, 15% or 20% depending on the amount of income Medicare tax on investment income of 3.8% for high earners Capital loss: income received from the sale of capital asset is less than its original purchase price. Loss of income can be used to offset income Up to $3,000 per year of loss of income can be used to offset ordinary income (such as wages)
Personal tax considerations Investments and taxes Tax planning: analyze your current and projected income and develop strategies to limit and reduce your tax liability. The tax plan should provide the maximum tax return after an acceptable level of risk. Tax-Advantaged Retirement Savings Plan Allows you to defer taxes until they are withdrawn in the future Employer-sponsored plans: Profit Sharing, Thrift and Savings, and 401(k) Self-Employed Plans: Keogh and SEP-IRA Individual Plans: Individual Retirement Plans (IRAs ) and Roth IRAs
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Investing throughout the life cycle Investors tend to follow different investment philosophies at different stages of life. Growth-oriented youth: the portfolio favors growth-oriented and speculative orientations; high-risk common stocks Mid-life consolidation: the portfolio shifts to low-risk investments such as stocks that provide a balance between growth and income Income-focused retirement: a portfolio that is more conservative in saving money and the money available in low-risk stocks and mutual funds, bonds, etc. .
Investing during the business cycle Investing is affected by conditions in the US economy. The business cycle shows the current state of several economic indicators: gross domestic product (GDP), industrial production, disposable income, unemployment. A strong economy manifests itself in expansion. business cycle Stock prices tend to rise during an expansion of the business cycle and fall during a downturn in the business cycle. Bonds and other forms of fixed income securities are also affected by the business cycle because their value is tied to interest rates that affect economic conditions.Financial conditions. and bond prices move in the opposite direction
Planning and securing sufficient funds, for example in case of unexpected expenses or opportunities, is an important part of