A financial investment is an asset that you put money into being hopeful it will yield and appreciate into a larger sum of money. The idea is that it can be sold later at a higher price or yield money while in one's possession. The major thing to consider is the time one has in making financial investment. The more time you have the more risk you can usually take and the more risk you take, the more potential for making more money.

KEYWORDS IN FINANCIAL INVESTMENT

• APPRECIATION:

The amount an investment grows to in value. For example, you buy a share of stock for 100 Euros and a year later it is worth 500 Euros; the stock has appreciated by 400 Euros.

• DIVIDENDS:

The cash payments that are paid out on financial investments based on the success and earnings of a company. For example, you invest in a stock and it pays a dividend of \$5. If you own up to 500 shares, you would get paid 500 * 5 which is \$2500.

• INTERESTS:

This is the fee a bank, institution or government pays you for loaning them money through the purchase of a stock or bond. You can also earn a small amount of interest on a savings account. For example, you may have \$1000 in government savings bonds that pay 5% interest annually; that adds up to \$500 a year.

FINANCIAL INVESTMENT CALCULATIONS

RETURN ON INVESTMENT (ROI)

It measures the gain or loss generated on an investment relative to the amount of money invested. ROI is usually expressed as a percentage and is typically used for personal financial decisions, to compare a company's profitability or to compare the efficiency of different investments. Formula for calculating ROI:

(Net of profit ÷ Cost of investment) X 100

SIMPLE INTEREST

This is computed as the product of the principal (amount of money on deposit), the rate of interest (usually written as a decimal) and the time (usually expressed in years).

SI = PRT

Where SI = Simple interest

P = Principal

R = Rate in decimal

T = Time

INVESTMENT CASH FLOW

This is the calculations for the inflow or outflow of money on asset overtime. To calculate investment cash flow, back losses are added and subtracted from the addition of the profit made which gives the net cash flow from the investment.

CALCULATORS FOR CALCULATING FINANCIAL INVESTMENT

• RETIREMENT CALCULATOR

The retirement calculator is used to create the most suitable retirement plan. It can be used to estimate how much to add to the retirement savings monthly or yearly to get the needed accumulated money.

• SAVINGS CALCULATOR

A savings calculator can be used to get indicative results for the total accumulation in a savings account, at the stipulated deposit frequency requested, towards the saving plan parameters entered which may include principal, amount to be deposited regularly and interest rate.

• FUTURE VALUE CALCULATOR

This calculator is used to estimate the future worth of an investment, how much it will bring, how much it will cost and how efficient it will be.

• INITIAL INVESTMENT CALCULATOR

This type of calculator helps an investor who is thinking of buying into an investment calculate how much money he needs to start up an investment.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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