Investments

The whole world of the useful things created by people and services can be sectioned into two cls, having miscellaneous bases. They, in turn, are decomposed on separate types. The maiden cl will be organised depending on patterns of ownership. It includes three types.

One type - products of individual consumption (consumer goods and factor of productions). They have following social and economic signs:

Such products are divisible, that is exist in the form of rather small unities which one are accessible to separate buyers;

These things are subject to so-called "exclusion principle":

The person which one not in condition to pay for the blessing at the market price leaves their customers;

The owner of a thing is only the one who wishes and to pay in a condition for it; such products are made by holders of the private and common share property.

Other type - state or the public benefits. These useful things, in essence, are not products: they form not for market sale to customers. These blessings have such bars:

The useful things are indivisible, as consist of so large unities which one cannot be given separate persons;

"Exclusion principle" (that is it is impossible to discharge people of usage of advantages of the yielded yields and services) is not spread to the material and non-material blessings;

Similar things and services form in public sector.

Classic example of the public benefits is the riser angle beacon orienting which one cues ocean vessels can use all without exclusion. Here it is possible to refer public security, national defence, automobile trunks and many other things.

The third type of the maiden cl - quasipublic or quasistate (an armour. quasi - ostensibly) the blessings and services. To them "exclusion principle" can be applied.

To this type concern: libraries, museums; prophylactic medical attendance; fire prevention, police, etc. For the yielded blessings and services can be set prices, and private proprietors (or holders of the common share property) can ensure with them customers for value. However such proprietors do not incur all production volume of such blessings. This task is fulfilled by the state not to admit a deficiency of socially useful things and services.

The second class of the blessings consists of things which one differ depending on character of requirements satisfaction. They are divided into such types.

One of them - interchangeable products. If purchasing of one of them sale of another drops grows. Examples can minister, we will suppose, pairs of yields: butter and margarine, tea and coffee.

Following type - взаимодополняемые the blessings. They accompany each other and the need for them is simultaneously enlarged or at the same time impinges. It, say, a motor vehicle and benzine, the computer and diskettes.

The third type - independent products. Needs for these things are not connected in any way (for example, bananas and a fish, knitted items and a watch).

As we see, the modern classification of the made blessings mirrors new realities of last third XX century: multistructure macroeconomic and the attained diversification of the made economic goods.

From stands of a so highly developed commodity farm we now will consider that represents product value.

§ 3. THEORIES OF VALUE (WORTH)

Learning of value of a product is strongly impeded on following condition. Value cannot be discovered directly on a surface of economic life as it expresses internal economical ratios invisible to an eye.

In this connection still A.Smith has parted economical system on two types of ratios: exogenous and endogenous (termed so on the modern nomenclature).

Exogenous (гр. ехо - out of and genos - a parentage) - economic connections which one are modified because of the parents of exterior character. For example, exchange value of products (a ratio from a market swap) can change depending on an amount hauled to a commodity market, from a season and other requirements watched by all.

Endogenous (from гр. endon - inside and genos - a parentage) - economic relations which one unstrand under the influence of internal factors. Value concerns to their number.

Economists-theorists have created two opposite concepts of value (worth).

Investments

1.The Nature of Investments

An investment is a financial too for maintaining, or increasing the expected value of today's funds.

Liquidity Investment experts define as-the "ability to convert an investment into cash quickly and without loss". Shares of stock in a corporation listed on a major stock exchange are highly liquid because they can be converted to cash almost immediately through a stockbroker. Funds tied up in a piece of real estate. Cash, of course, is the most liquid asset a businessperson can own because it is ready for immediate expenditure or investment. Idle cash loses value from inflation. Extreme liquidity has its price.

Liquidity requirements vary depending on the needs of the investor. Cash or highly liquid investments can help a lumberyard owner meet weekly employee payrolls. Relatively less liquid investments, such as bank certificates of deposit with penalties for early withdrawal, can be used to pay quarterly tax payments.

Risk To the investor, risk is a relative rather than absolute concept, involving the likelihood that an investor will be able to get his or her money back. In the words of a respected financial planner, "There is no such thing as no risk, only varying degrees of risk." Three specific categories of risk are (1) business/ financial risk, (2) market/ interest rate risk, and (3) political/ world events risk. Each category of risk needs to be weighed carefully prior to making an investment.

Business/financial risk This type of risk, particularly relevant to those investing in corporate stocks and bonds or those extending trade credit to a buyer, is concerned with the financial health of the company. Some companies are an unreasonable financial risk because they have taken, on too much debt. Others suffer from poor management. Business/ financial risk is also tied to the earning potential of a company. In this regard, investors want to know how much in demand a company's goods/ services are.

Market/ interest rate risk All markets are moving targets with their own dynamic relationships. This includes money markets, stock and bond markets, commodity markets, and markets for goods and services. Investors need to study historical patterns in a given market before investing. History, of course, is a helpful but not perfect predictor of future events. Interest rates, meanwhile, not only fluctuate in response to market variables such as investor confidence, they also are manipulated by the U.S. Federal Reserve as a way of stimulating dampening the economy. A widely publicized benchmark for interest rates is the prime rate.

Political/ world events risk In our increasingly globalized economy, financial markets are sensitive to worldly events. New tax legislation, revolutions, wars, and cartels take their economic toil. Far- flung people and situations can affect world markets in strange and complex ways. Wise investors stay abreast of world events to keep from being caught up in situations beyond their control.

Return Any profit that investors make from their investments is called their return. In effect, return is the reward for taking an investment risk. Two ever-present threats to investors' returns are inflation and taxes.

Date: 2014-12-28; view: 821