1. What is investment property?
1.1. Definition of investment assets
Investment assets are assets purchased with the goal of generating future profits. They can increase in value over time or generate passive income, helping investors grow their assets.
For example, a person can invest in stocks with the expectation that their value will increase, or buy real estate to rent out and earn monthly income.
1.2. The role of investment assets
Investment assets play an important role in building wealth and protecting personal and business finances. Some of the important roles include:
- Increase assets: Investments help investors increase their wealth through capital gains or income from assets.
- Create passive income: Certain investment assets such as dividend-bearing stocks, interest-bearing bonds, or rental properties provide a steady cash flow.
- Minimize financial risk: By having a diversified portfolio of investment assets, the risk of loss is spread, minimizing the negative impact if one investment fails.
- Protect asset value against inflation: Some assets such as gold and real estate help protect asset value against high inflation.
The role of investment assets
2. Popular types of investment assets
There are many types of investment assets with different levels of risk and return. Here are the most popular types today:
2.1. Stocks
Stocks are securities that represent partial ownership of a business. As the value of the business increases, the price of the stock also increases, bringing profits to investors.
Benefit:
- High profit potential.
- Some stocks have dividends, providing steady income.
- Easy to trade on stock exchanges.
Risk:
- Large price fluctuations, depending on economic situation.
- If the business performs poorly, investors may lose money.
2.2. Bonds
A bond is a type of debt security issued by a company or government to raise capital. The buyer of the bond receives periodic interest payments on their investment.
Benefit:
- Less risky than stocks.
- Stable income from interest.
Risk:
- Lower returns than stocks.
- Inflation risk reduces the real value of bonds.
Popular types of investment assets
2.3. Real estate
Real estate is one of the most popular types of investment assets, including land, houses, commercial buildings, etc.
Benefit:
- Value usually increases over time.
- Can generate passive income from rental.
Risk:
- Large capital required for investment.
- Low liquidity, difficult to sell quickly when needing money.
2.4. Gold & precious metals
Gold is a traditional investment channel and is considered a safe haven asset during times of economic instability.
Benefit:
- Protect assets against inflation.
- High liquidity, easy to buy and sell.
Risk:
- Does not generate passive income.
- Gold prices may fluctuate according to global markets.
2.5. Cryptocurrency
Cryptocurrencies like Bitcoin and Ethereum are becoming an attractive investment channel thanks to their high profitability.
Benefit:
- Very high profit potential.
- Fast transactions, no intermediaries required.
Risk:
- Strong price fluctuations, prone to great risks.
- Not fully protected by law.
3. How to build an effective investment portfolio
An investment portfolio is a combination of different types of assets to optimize returns and minimize risks.
3.1. Principles of portfolio construction
- Asset diversification: Avoid focusing on a single asset class to reduce risk.
- Define financial goals: Short term or long term investment? How much risk do you accept?
- Monitor & adjust portfolio: Periodically evaluate and adjust to suit the market.
3.2. Investment strategy according to risk appetite
Low risk taker (safety first):
- 50% bond
- 30% stock
- 20% gold
High risk taker (Growth priority):
- 60% stock
- 20% cryptocurrency
- 20% real estate
Principles of portfolio construction
4. Factors affecting investment assets
4.1. Economic market
The overall economy has a strong impact on the value of investment properties. When the economy is strong, businesses grow well, the stock market is buoyant, and real estate values tend to rise. Conversely, when the economy is in recession, many types of assets can decline in value.
Impact of economic markets on asset classes:
- Share: Prices increase when the economy is growing and decrease when there is a crisis.
- Real estate: The real estate market typically grows when the economy is stable but can freeze when a recession occurs.
- Bonds: When the economy weakens, government bonds become the safer choice.
- Yellow: Often increases in price when financial markets are volatile.
4.2. Inflation
Inflation is a sustained increase in the price of goods and services over time, reducing the purchasing power of money. When inflation is high, the value of cash is eroded, affecting investment assets in a variety of ways.
Impact of inflation on investment assets:
- Share: Some businesses may increase their stock prices if they are able to pass inflation costs on to customers (e.g. consumer goods, energy). However, high inflation can reduce business profits due to increased production costs.
- Gold & Commodities: Gold often increases in value during times of high inflation, as it is seen as a safe haven.
- Bonds: Bonds have a fixed yield, so when inflation rises, the real yield on bonds falls, reducing the appeal of this asset class.
- Real estate: Real estate prices typically increase with inflation, especially homes in high demand areas.
4.3. Financial policy and interest rates
Interest rates and financial policies of central banks have a direct impact on investment markets.
Impact of interest rates on investment assets:
- Share: When interest rates are low, businesses can borrow money more cheaply to expand, boosting stock prices. Conversely, when interest rates rise, borrowing costs become higher, reducing corporate profits and making stocks less attractive.
- Bonds: Rising interest rates reduce the value of old bonds (with lower interest rates), but increase the yield on new bonds.
- Real estate: Low interest rates encourage people to borrow money to buy houses, which increases real estate prices. When interest rates are high, borrowing money to buy houses becomes more expensive, causing the real estate market to stagnate.
Investment assets plays an important role in building wealth and protecting personal finances. Choosing the right type of assets and building a reasonable investment portfolio helps optimize profits and minimize risks. In addition, smart investment platforms such as LiveTrade Pro can help you access attractive financial opportunities, track your portfolio easily and optimize your investment strategy.
