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Article: Investment


History and Terminology

  • The qirad was a major financial instrument in the medieval Islamic world.
  • The qirad was similar to the institution of the commenda used in western Europe.
  • In the early 1900s, purchasers of stocks, bonds, and securities were called speculators.
  • After the Wall Street crash of 1929, the term investment came to denote the more conservative end of the securities spectrum.
  • Speculation and speculator have referred to higher risk ventures since the last half of the 20th century.

Investment Strategies

  • Value investing involves buying undervalued assets and selling overvalued ones.
  • Value investors use financial analysis to evaluate securities.
  • Warren Buffett and Benjamin Graham are notable value investors.
  • The price-to-earnings ratio (P/E) is a significant fundamental ratio used in value investing.
  • The price-to-book ratio (P/B) is another important metric for evaluating investments.

Growth Investing

  • Growth investors seek investments with higher future earnings or value.
  • They evaluate current stock value and predictions of future financial performance.
  • Capital appreciation is the main goal for growth investors.
  • The price-to-earnings (P/E) multiple is often used in growth investing.
  • Growth stocks typically have higher P/E ratios compared to others in the industry.

Risk and Return

  • Investors generally expect higher returns from riskier investments.
  • Low-risk investments usually have lower returns.
  • Diversification reduces overall risk in a portfolio.
  • Investing in tangible assets like property also carries risk.
  • Industry volatility can affect the level of risk in different sectors.

Foreign Exchange Risk

  • Savings in foreign currency accounts are exposed to foreign exchange risk.
  • Changes in exchange rates can decrease the value of savings accounts.
  • Investing in foreign markets involves currency gains or losses.
  • Foreign exchange risk can impact investment returns.
  • Hedging strategies can be used to mitigate foreign exchange risk.

Investment Mentions

Investment Data Sources

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