Investment Definition Quiz

• Modern financial investments include stocks, bonds, cash, real estate, private equity, other loans, commodities, collectables, carbon offsets, digital entities, and hedge funds.
• Stocks represent business ownership, Bonds are loans, Cash is holding a currency, Real estate can be rented or resold, Private equity is in non-publicly traded businesses, Other loans include mortgages, Commodities are goods like gold or potatoes, Collectables are items like art or stamps, Carbon offsets are environmental credits, Digital entities are cryptocurrencies or NFTs, and Hedge funds use sophisticated techniques like derivatives and leverage.
• Investment involves risk of loss of capital, unlike arbitrage which generates profit without investing or bearing risk.
• Savings can default, and foreign currency savings bear exchange rate risk.
• Property investment also has risks, which can be mitigated through mortgages and lower loan ratios.
• Industry volatility influences investment risk, with biotechnology being particularly risky due to the high failure rate of products.
• The qirad, an Islamic financial instrument, involved investors entrusting capital to agents for trading and sharing profits.
• In the early 1900s, investors in stocks, bonds, and securities were called speculators, but the term investment came to denote more conservative securities.
• Value investing involves buying undervalued securities using financial analysis and ratios like P/E.
• Value investors, like Warren Buffett and Benjamin Graham, seek undervalued stocks and sell overvalued ones.
• Graham and Dodd's Security Analysis was written after the 1929 stock market crash.
• The P/E ratio is an important fundamental ratio for comparing stock valuations, with a lower P/E indicating a cheaper stock for the same level of financial performance.
• Industry comparisons require considering P/E ratios in context, as normal ranges vary between industries.

Test your knowledge on the definition of investment and its broader viewpoint. This quiz will also cover the concept of net monetary receipt in a time period.