What to invest in if you have savings?

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When a company or a bank or an individual plans to invest in something such as buying a new machine, building a new factory, buying new buildings, the company first needs to do investment appraisal.
There are two appraisal methods. One of them is the payback method. The investment could be chosen if the money can be paid back quickest. Another investment appraisal method is the return on capital employed (another name can be the accounting rate of return). It is evaluated using percentage concept. The investment would be worthy if the profit is great. (Steve Lumby & Chris Jones)

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According to Gitman, Joehnk, and Smart, financial management can be divided into two decisions—short-term financial decision and long-term financial management. Short-term investments typically mature within one year. Short-term assets include debtors, inventory and cash. There is usually little or no risk in short-term investment. Short-term investment is popular among conservative investors who may be not reluc-tant to lock up their funds in long-term assets such as stocks or bonds. Returns on most-short-term investments vary with inflation and market interest rates, investors can get higher returns as rates move up.

Long-term investments are those with longer maturities, or common stock with no ma-turity at all. The sources of long-term investments could be bank loans and finance leas-ing. Finance leases can be as long as many years.

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Stock investment or house investment?

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Common stocks are popular investment targets among both individual and institutional investors. When the market is strong, investors can get benefits from a steady price. However, the market also has its bad days and sometimes those bad days seem to go on for months. Stocks provide investors protection from inflation because over time their returns exceed the inflation rate, i.e. the investors increase their purchasing power over time. Another advantage is that they are easy to buy and sell and the transaction costs are modest. (Gitman, Joehnk & Smart)

Homeownership has been considered an important investment way for personal wealth accumulation. One element related to housing investment is the rate of price apprecia-tion. Another element is the cost of renting. Generally, the house ownership is a wiser choice than renting. A house investor must assess many factors when investing in housing such as environmental factors, housing construction company, site, services, quality of utilities, noise levels and transportation etc. (Brueggeman & Fisher)

In Finland the house market has been stable. According to Teivainen in Helsinki Times 28 Jan 2014, Pellervo Economic Research (PTT) projects the house prices will in-crease by 2.5% in Finland in year 2014. Even international real estate investors come to invest in Helsinki region. Hänninen and Laitinen wrote in Helsinki Times 29 Jan 2014 that in the early 2000s foreign real estate investor and equity funds have acquired Finn-ish properties at a value of 15 billion Euros.

It’s definitely worth investing in housing if you have money! If you are planning to invest in housing, please check the webpage: http://www.oikotie.fi


William B. Brueggeman, Jeffrey D. Fisher. Real Estate Finance and Investments. Four-teenth Edition 2011.

Lawrence J. Gitman, Michael D. Joehnk, Scott B. Smart. Fundamentals of Investing. Eleventh Edition 2011.

Steve Lumby & Chris Jones. Investment Appraisal & Financial Decisions. Sixth Edition published by International Thomson Business Press 1999.

Richard Pike and Bill Neale. Corporate Finance and Investment
Decisions and Strategies. Sixth Edition 2009.



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4 Responses to What to invest in if you have savings?

  1. saararintanen says:

    A very informative post! It gives some food for thought for the future.

  2. asdasdasd says:

    Nice pics. Well written and nicely structured! Good job.

  3. marmp says:

    Very interesting and thought-provoking topic.

  4. student_J says:

    Good post, it provides some useful advice.

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