What is investment?
Standard 2 - Personal and financial goals can be achieved by applying economic concepts and principles to personal financial planning, budgeting, spending, saving, investing,borrowing, and insuring decisions.
Benchmark - 9.2.2.2.2 -Evaluate investment options using ctiteria such as risk, return, liquidity and time horizon; evaluate and apply risk management strategies in investing and insuring decisions.
After having watched the brief video on investing now read through the information and submit the answers to the questions at the bottom.
In economic theory or in macroeconomics, investment is the amount purchased per unit time of goods which are not consumed but are to be used for future production (ie. capital). Examples include railroad or factory construction. Investment in human capital includes costs of additional schooling or on-the-job training. Inventory investment is the accumulation of goods inventories; it can be positive or negative, and it can be intended or unintended. In measures of national income and output, "gross investment" (represented by the variable I) is also a component of gross domestic product (GDP), given in the formula GDP = C + I + G + NX, where C is consumption, G is government spending, and NX is net exports. Thus investment is everything that remains of total expenditure after consumption, government spending, and net exports are subtracted (i.e. I = GDP − C − G − NX).
Non-residential fixed investment (such as new factories) and residential investment (new houses) combine with inventory investment to make up I. "Net investment" deducts depreciation from gross investment. Net fixed investment is the value of the net increase in the capital stock per year.
Fixed investment, as expenditure over a period of time ("per year"), is not capital. The time dimension of investment makes it a flow. By contrast, capital is a stock— that is, accumulated net investment to a point in time (such as December 31).
Investment is often modeled as a function of Income and Interest rates, given by the relation I = f(Y, r). An increase in income encourages higher investment, whereas a higher interest rate may discourage investment as it becomes more costly to borrow money. Even if a firm chooses to use its own funds in an investment, the interest rate represents an opportunity cost of investing those funds rather than lending out that amount of money for interest.[2]
For extra reading go to this link:
http://www.investopedia.com/terms/i/investmentstrategy.asp#ixzz1zcPATHVb
1. What is the ultimate goal when you are investing?
2. Describe the factors that will help you determine what to invest in and when?
3. Which formula makes the most sense to you? Why?
4. The final questionwill ask you to find a stock price, submit that price today, and check back three weeks later to see if money was lost or made. Name of stock_____________ Price_________ Units for $1,000.00 investment____________. After three weeks please submit the changes in Price and value in the Recent Events Section.