Investment ideas are general, non-specific views, strategies, or insights about how to invest efficiently. Most investment consultants and professional portfolio managers generally recommend a variety of investments depending on individual circumstances and then build customized investment portfolios around such investment ideas and strategies that target a certain style of investor. The investment ideas can be anything from stocks and bonds to commodities and derivatives. Investment specialists believe that the key to financial success is understanding the investment ideas and how to implement them. They also recommend that potential investors educate themselves on the topic so they have a good understanding of its concepts and how to apply them.
The modern portfolio theory originated in the United States during the early decades of the twentieth century as an effort to explain and facilitate better understanding among investors of their own and other portfolio management issues. The theory is designed to provide investment managers with a set of tools to assist them in developing efficient and effective investment plans. The modern portfolio theory is based on the idea that any investment plan should be primarily based on research and that investors need to understand and analyze investment plans and options. It also recognizes that no two individual investors will have identical investing goals and therefore investment plans must be customized to fit the needs of each particular investor.
The modern portfolio theory is a relatively young concept. Its roots can be traced to the early 1960s when investors began to search for new and innovative investment ideas to make their money work harder and be more socially responsible. The search led to the birth of the investment Research Organization and the publication of the book, Investing, which sought to provide investment managers with tools to help them make better investment decisions. Other related concepts and theories have been developed by investment professionals since then including, risk aversion, the importance of diversification, and the role of the media in encouraging investors to be actively involved in their own investment planning. In recent years, new investor concepts including social media, quantitative analysis, and unconventional investments have gained ground.
The new investor theory maintains that individual stocks are a poor substitute for investing in large quantities of common stocks. This is because individual stocks come with less volatility and tend to move more slowly than do large numbers of common stocks. Also individual stocks typically follow a more linear path than do group investments, so investing in large volumes tends to create a sense of stability for an investor and thus better predicts future returns. As a result, it has been found that individual stocks are generally not as psychologically stable as common stocks and are not as likely to follow investment trends as widely suspected by the investing community as do large numbers of common stocks.
Social Investment The belief that everyone should invest some of his or her money in society has led to a variety of investment ideas over the years including dividends, insurance, social security, and stocks bought through socially responsible organizations (SRI). Dividends are considered a good investment because they increase the value of your stock ownership by allowing investors to receive a portion of the profits from the corporation. Insurance is another popular idea that many investors use to guard against future threats. Since insurance companies issue a wide variety of stocks, many investors use this investing strategy to spread out the risk. In addition, stocks purchased directly from a company usually give you better tax deductions than those purchased through an investment company.
Alternative Investments: An alternative investment is a specialized kind of investment that can sometimes be more risky than other types of investments, but yields a more even, consistent income. Some of the risk involved in alternative investments is related to fluctuating market prices, interest rates, and government policies. However, most alternative investments attempt to use a stable asset base to diversify portfolios, and therefore, do not present as much risk as stocks. Examples of such alternative investments include bonds, precious metals, real estate, and food stocks. Each of these options have advantages and disadvantages that you need to carefully consider before investing your money.