Investing is one of the things that most earning people think about but fear. This is because some people are scared of the risks involved in investment. Also, people are confused and have no clear information of which types of investments are best to invest in and also how to tackle the problems that come with investing. This work will help you know the different ways of investing your £5 million and decide on where to invest your capital among the different types of investment among them bonds, shares, stocks, and properties without forgetting how market and financial institutions work including financial instruments and risks involved. (Laborde et al. 2021, 4). Investing is a risky decision but it’s worth it since it boosts your financial status.
Financial instruments
Financial instruments are contracts that two parties sign involved with monetary assets which can be created, modified, purchased, or traded for. Financial instruments are divided into types namely, cash instruments, and these types of instruments are affected directly by the state of the market. They are loans and deposits between creditors and debtors. (Sirignano and Cont 2019, 1449). I suggest that you consider investing as a creditor where you will lend the £5 million and in return, you will earn interest rates that will have accumulated depending on how long you lend the money and the interest rate you agreed with the debtor. Another type of financial instrument is derivatives and they are instruments whose worth is decided by fundamental assets like bonds, currencies, stocks, and indexes of the market. I would also advise you to invest using a derivative instrument but this time you must be careful since the value of one of these assets depends on the value of the other. Finally, I can suggest you invest £5million in the cash instruments since the risk involved is minimal. (Liubkina et al. 2019).
Financial markets
A financial market is a venue where an organization signs a contract to buy or sell precise products like bonds and stock with a person. The type of market depends on what product you want to buy however these financial markets are regulated and are managed by professionals (Mckillop et al. 2020, 101520). For example, loans are gotten from banks or unions that give out credits while the security market sells bonds and stock so here, I would recommend you to use the £5 million in buying and then sell bonds and stocks since you are interested in earning more and not getting loans. The mandate of the security market is to help a business earn investment capital. The over-the-counter market is another type of security market that which sellers and buyers use computer networks to transact and trade. This market is not entirely safe and I advise you before transacting online, to be sure of who you are transacting with and how genuine your partner is. A stock certificate is given when a buyer buys from a seller through a broker when the time of trading is favorable for both sides. Also, bonds are transferred from the seller to the buyer after transacting. (Jiang et al. 2019, 125901). So investing in bonds and stocks physically is what I can recommend to you.
Financial institutions
Financial institutions are firms that give services associated with finance to customers. They join spenders and savers by providing funds that customers have deposited to needful business owners or individuals. However, these financial institutions are of two types, for example, they are those that offer general services and give room for the public to own accounts while others offer special services to a specific group of customers who award them special offerings. There are distinct types of financial institutions that you are supposed to choose depending on the services you need including commercial banks, loans and saving associations, and investment banks and companies. Since you are interested in making profits and earning more, you should invest your £5 million in the investment banks and companies by buying shares because they give out interest at the end of a certain period. Nowadays some institutions operate online or physically and physical is the best for you. (Haralayya and Aithal 2021, 159).
Capital risks and solutions
Prospects that a firm may gain loss from investments are referred to as capital risk. You should know that the business can either lose all the £5 million invested or part of it. Investing in real estate, stocks, and bonds that are not owned by the government are places where you may find the capital risk. When you invest in a program that ends up failing then you are going to face a capital risk. However when it comes to the management of these risks, they are no shortcuts, it’s entirely based on facts and probability approaches. First, I can suggest you choose to avoid the risks if the action involved has a very low possibility of happening and can cause huge financial harm this is mainly associated with stocks investment. Second, minimize the risk by measuring the probability of the occurrence of the activity and investing less money. Another one is you can decide to share the risk by sharing the capital with another potential investor. Finally, I can advise you to embrace the risk if the profit involved is bigger than the £5 million capital investment. Although the risk is a bitter pill its worth swallowing for modern businesses. (Valaskova et al. 2018, 105)
In conclusion, you can choose the best financial markets, institutions, and instruments wisely depending on where you want to invest the £5 million either in bonds, stocks, shares, or properties like real estate. You should also be prepared for the risk involved and know how to manage them as highlighted. Indeed investing is a risky decision that is worth taking.
Reference
Haralayya, D. and Aithal, P.S., 2021. Study on Productive Efficiency of Financial Institutions. International Journal of Innovative Research in Technology (IJIRT), 8(1), pp.159-16. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3860864
Jiang, Z.Q., Xie, W.J., Zhou, W.X. and Sornette, D., 2019. Multifractal analysis of financial markets: a review. Reports on Progress in Physics, 82(12), p.125901. https://iopscience.iop.org/article/10.1088/1361-6633/ab42fb/meta
Laborde Debucquet, D., Parent, M. and Piñeiro, V., 2021. Prioritization of types of investments: Operational tools for MCC agricultural investments (Vol. 4). Intl Food Policy Res Inst. https://books.google.co.ke/books?hl=en&lr=&id=OZRREAAAQBAJ&oi=fnd&pg=PR3&dq=types+of+investments&ots=1DCoSuEFR6&sig=Tk1dw6Ory9HJBliKEZUnb2F71j4&redir_esc=y#v=onepage&q=types%20of%20investments&f=fal
Liubkina, O., Murovana, T., Magomedova, A., Siskos, E. and Akimova, L., 2019. Financial instruments of stimulating innovative activities of enterprises and its improvements. https://essuir.sumdu.edu.ua/handle/123456789/76319
McKillop, D., French, D., Quinn, B., Sobiech, A.L. and Wilson, J.O., 2020. Cooperative financial institutions: A review of the literature. International Review of Financial Analysis, 71, p.101520. https://www.sciencedirect.com/science/article/pii/S1057521920301642
Sirignano, J. and Cont, R., 2019. Universal features of price formation in financial markets: perspectives from deep learning. Quantitative Finance, 19(9), pp.1449-1459. https://www.tandfonline.com/doi/abs/10.1080/14697688.2019.1622295
Valaskova, K., Kliestik, T. and Kovacova, M., 2018. Management of financial risks in Slovak enterprises using regression analysis. Oeconomia Copernicana, 9(1), pp.105-121. https://www.ceeol.com/search/article-detail?id=719734
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