Basics of finance and investment Essay Example | Topics and Well Written Essays - 1500 words

Basics of finance and investment - Essay ExampleBad news is always remembered more than because it is human nature that peoples miseries create a stronger impact in our minds. But it should in any case be remembered that if there is a Leeson, there is also a Warren Buffet. Money was lost on lucre contrasts, but just before that, money was also made on the same internet stocks. And Bernard Madoff was one of a kind, who took advantage of peoples confidence to him as a SEC consultant. There was nobody before or after him who operated at the level he did, because the there is usually in place an effective regulation of the market and most such operators ar caught early on (Arnold, 2004).If there are no extreme developments such as market crashes and financial crises, investing for value long-term has always been sound strategy for enhancing wealth. There are several vehicles for investment the savings account, the money market, certificates of deposit and common stocks are some of them. Each of these instruments is associated with a particular level of rate of feed. The rate of give-up the ghost is the percentage gain an investment makes in short, how much yearly earnings are expected as a proportion of the capital invested. The rates of return fluctuate, but they maintain a more or less consistent relationship with those of the others. For instance, the savings account in a bank would normally impart the lowest rate of return which is denoted by its interest rate. The money market placement has a slightly higher interest rate, followed by certificates of deposit, and then the stock investment. The average rates of return for each of these instruments is shown in the second row of Table 1 (source UK National Statistics Online).The rate of return plays an important part in the concept of compounding. In compounding, the returns that have been accumulated for one year becomes part of the