For most business investors the term Investment is used in two different senses: with money and without money. With money, an investor expects to make a profit by using the funds to make an investment and receive a return on his / her principal. This is called the passive form of investment. With the passive form of investment, the principal amount invested is less than the amount realized through the use of money.
Other types of common investments are in bonds, stocks, mutual funds, commodities, money market funds, derivatives (contracts for difference), and real estate. All these forms of investments, whether used to make profit or to accumulate money, are collectively known as the “real” or “equity” markets. The stock market is a giant pool of investments where investors trade (either buy or sell) shares of stock for profit; hence the term Stock Market. All of these investments yield returns either immediately (on the trading day), or (if an investor waits for a specified period) over a period of time; the longer the period of time, the higher the potential return.
Another type of investing is called bond investing. A bond is typically a leveraged stock or a non-leveraged financial product such as a loan or lease, with a fixed interest rate guaranteed by the issuer. Bonds are considered safe because, although the risks of inflation, deflation, and bankruptcy may result in defaults, losses do not exceed the bond’s initial value. Bond investing is popular among businesses and is a common practice. Most commercial banks offer some type of bond investing service. A company can take advantage of this service by buying or selling a bond at a predetermined price and then repaying the lender upon its maturity date.