Total Investment Definition and Meaning
Do you want to know the meaning and definition of total investment? Here in InvestmentTotal, I am writing different topics about personal finance and financial terms, awhile ago I already wrote topics about the meaning of investments, meaning of stock split and today the meaning of total investment. Anyone who is interest to invest their money whether it is on stock market, mutual funds investing, trust accounts in the banks, time deposits or government securities such as treasury retail bonds and retail bills, should know how to compute the total money they are invested.
Simple Definition: Total investments means the total invested capital (particularly money) in every investment vehicle (paper assets such as stocks, mutual funds, 401k plan, trust accounts in the banks, time deposits, bonds or real estate properties, and business) you participated. For further explanation, keep on reading.
Total Investments Sample Computation
Total investment means the total capital or the total money you used when investing.
Let us sum up the example of invested capital in this example. If John Doe is investing in the stock market and his exact total investment in the stock market is $300,000. John Doe decided to invest in Fidelity Mutual Funds (stocks funds) worth $30,000, and he has a time deposit account worth $12,000 and a retail treasury bonds investment worth $25,000.
Aside from paper assets, John Doe is a business owner, his total investment in his business is $250,000. John Doe decided to invest in real estate buying a foreclosed properties in New York City, he has invested money with an exact total amount of $500,000. The question is, what is the total amount of money invested by John Doe?
Answer:
- Stock Market Investment: $300,000.00
- Mutual Funds Investment: $30,000.00
- Time Deposit Investment: $12,000.00
- Retail Treasury Bonds Investment: $25,000.00
- Business Investment: $250,000.00
- Real Estate Investment: $500,000.00
- Total Investments: $1,117,000.00
Double Your Total Investment Capital
That is how you compute the amount of invested capital. This time let us know how to double your money in each of the investment vehicle. By using the rule of 72, you can easily know when to double your investment capital. See example, keep on reading.
Stock Market Investment: $300,000.00
Investment Goal: To double the investment capital in 5 years or have a total return on investment worth $600,000
Formula: 72/number of years you want to double
72/5= 14.4
Your stocks should earning at least 14.4% interest every year to achieve the goal – to double your investment capital in the stock market.
Rate of Return on Total Investments
You should also be aware on how much you can get for the return on your total invested capital. You have to track the rate of return of your investment whether it is per week, per month, per quarter or every year. It is important to know the rate of return of your investments so that you will know if you are gaining profits or losing money. Also, by knowing the rate of return of an investment vehicle can help you decide if it can help you meet your needs and investing goal.
For example: If a mutual fund equity in mutual fund company ABCDE has an earning rate per annum of 18%, for every $100,000 you are earning $18,000 per year. In four years you doubled your money if you invested your money in the mutual fund that is earning 18% per year. How did it happen? It is because the effect of compound interest.
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Money Quote and Saying for the Day:
Wide diversification is only required when investors do not understand what they are doing. – Warren Buffett