Capital employment is putting your money, properties, land and other income-generating equity such as factory or office equipment to work, either in investment or speculation. Putting your money at home or in other places without earning income such as interest is not capital employment. Some people may argue that putting money at home or in a safe deposit box is safer. While this may be true in some other backward countries, it is not true in the United States or in other advanced countries. Almost all the accounts in banks in the United States are insured. If a bank go bankrupted, you can get all your money back under maximum limit.
Capital employment is good because it can bring you income if you do it properly. You can get income either through simple saving account or complicated foreign exchange speculation. In order to gain much, or any gain at all, from your speculation or investment you have to take a look at yourself first. How old are you? How much time you are willing to put in? How active you want to be? What is your educational background? What is your personality? What is your aptitude? What is your like and dislike? What is your investment objective? How much money you have to invest? How much risk you are willing to take? How soon you want your money back? How much you want to make?
If you are timid and do not know much about investment and speculation, you may put your money into a saving account. It almost has no risk. It is 100% liquidity. But the income is poor or worse yet you may end up “losing money” because their interest income cannot offset the loss of their dollar value decreased with time. For smart people, savings account is only good for storing emergency funds.
If you are conservative, have a job or have enough money for mortgage payment and other maintenance expense, or have good credit for loan (buying properties with borrowed money possibly has better leverage than buying properties with cash) and not too old, you may consider buying properties. You can hardly lose money if you buy properties and intend to keep it for a longer period of time. The market value of properties always rise with time most of the time. The appreciation value and rental income combined can easily offset the mortgage payment and other maintenance and processing fee. It is considered a relatively safer investment. However, it need a longer period of time to realize a profit. And the liquidity is poor.
If you are an older person, you may not have enough time to wait for property appreciation. You should not invest in properties unless you buy it for speculation - buy distressed properties and fix it and sell it at the right time. In this case, timing and location is very important. Choose the time and location when and where the demand for housing is big. And again, take a look at yourself. This can be a full time job and may require you to be active.
If you don’t have the time and don’t want the hassles, you may choose to buy US Saving Bond or US Treasury Bill from Uncle Sam. This is considered the safest investment with almost zero risk. But the yield is not as much as from property investment. Sometimes, the interest income may not even offset the loss of the value of your dollar due to inflation. If you want better return, try corporate bond. They pay a little bit better. But you have to know how to pick and need to watch for their business performance. This is a good choice if you don’t want to interact with people much.
If you are active and have some time, you may consider putting your money to work in stocks. To be effective, buying and selling stocks require some financial knowledge. It help if you have a business education background. If not, you need to take some courses on general business, economics, and accounting so that you can understand financial analysis and economic climate. If you have the aptitude and have keen observation and judgment, welcome abroad.
Considering the amount of money you put in , in my opinion, buying and selling stocks has a better leverage. Capital appreciation can be great if you can invest your money for a few years. Sometimes they pay stock dividend too. Again, you need to know how and when to pick the right stock and when to sell. This is where your financial knowledge can be used. The risk is usually low if you know how to do it.
If you want quick profit, you may need more time or even full time. Stock speculator need to watch and analyze the market and the stocks every trading day. Besides you need to know the technical analysis method and even some human psychology knowledge. You must be keen and active to do so. If you can handle it, the pay can be great and quick. Cash flow is excellent. But the risk can always be greater. Investing your money in different companies and in different kind of sectors may minimize your loss. Don’t put all your eggs in one basket.
The good thing to invest in stock is that you don’t need a lot of money. The fee is small. You don’t need good credit like the property investor need for a property loan. Unlike property owner, you can get into and out of them more easily. In other words, the liquidity is good. The bad thing is you don’t have total control and is not tangible. The market is greatly influenced and manipulated by big investors and there may be some corporate fraud cover-up you do not know.
Business investment usually need quite some money and a lot of time and work if you need to run your business yourself. It also require you to have good credit if you need a business loan. You may have a lot of hassles in running the business too. The good things is you have total control and is tangible. You can see everything, if you know what I mean.
If you don’t have the time and don’t want the hassles, or you don’t have the knowledge, you may want to invest your money in some kind of mutual fund. Novice investor are likely to find mutual funds a good way to start investing because professional management - in theory, at least - often provides larger profit and appreciation than you can provide for yourself. Sometimes, sophisticated investor may find it handy too. By pooling your resources with other investors, you can diversify even with a small investment over a wide spectrum, which should reduce risk. Indeed, many funds outperform other investments, and far surpass inflation. The drawback of mutual fund is you have no control of how they do with your money.
There are funds of every size and description, covering a wide range of investment objectives, management policies, degrees of risk, and profit opportunities. Some are well-managed, some poorly managed, some conservative to the extreme, some are highly speculative, with all kinds in between. Some give good return and some do not.
Once again, you need to know how to pick a good one. This is especially true in mutual fund investing because you have no say after you hand over your money. How do you make an intelligent selection? You simplify the problem when you first consider your own personal aims and requirements. Then you narrow down to the category of funds you are interested in. After that, you examine the prospectus, portfolio makeup, investment objectives and past performance record of the mutual fund you are interested in.
If you want total control of your investment and not much of the hassles, you may want to consider investing in actual gold for long term. All you need to watch is the economic climate. Buy and sell at the right time you are guaranteed for a profit. But you probably need to wait for a period of time if you want to sell it for a profit at the right time. Unlike stock, gold has physical value. Gold is almost like money. You can convert gold into cash easily. As a matter of fact gold is better than money. Not only you can keep its value during bad times you can also use gold to hedge inflation.
If you want some quick profit in investing gold, you might need some time and more financial knowledge. Gold price can fluctuate highly day to day because of many factors including, but not limiting to, exchange rate, commodity price, interest rate, politics, consumer confidence, war and conflict, and stock performance. For example, if some foreign countries use her huge trade surplus with US to buy US Treasury Bills, this will drive down the US currency value thus increasing the price of gold. Either investing in stock of gold-mining companies or some kind of ETF or speculating on gold future you need to know when and why the gold price rise and fall.
If you have the time and skill you can try commodity trading. It is a speculation. The return can be good. But the risk is higher. You need to use various hedging techniques and devices, including options trading, selling short and transactions in future contracts.
Capital employment gain can be achieved only through careful planning and cautious progressive action. You must first understand that all kinds of capital employment carry some degree of risk. Don't put all your eggs in one basket. Diversification — distributing your money across different types of capital employment (such as: bank deposits or government bonds, stocks or real estate, etc.)— combined with an appropriate allocation of funds among different tools is the key to sound capital employment. Then you find out what type of capital employment that suit your need. Under each type of capital employment you find out what instruments (such as: trading stocks yourself or joining a mutual fund) is most beneficial. Finally, you make the choice of tools (such as: to buy which stock or mutual fund ). You should fully understand the characteristics of different tools that you are getting into before you act. A cautious start is called for after the completion of your plans and progressive action plan. Good choice should be coupled with patience, not to buying and selling every day, but preferably re-evaluate your portfolio at interval whether it was necessary to make some adjustments.
