An investment opportunity is any situation where you have the option of purchasing something that has a chance to gain value in the future. Investment opportunities are different from investment prospects, which refer to possible future investment opportunities. The key to making money through investing is knowing which opportunities to take advantage of and how to manage them.
Investors who seek out investment opportunities will find no lack of options. Stock markets stay in business by marketing investment opportunities to buyers who put their money into companies with hopes that they'll grow. Government bonds are another source of investment opportunities, allowing buyers to loan money to the government in exchange for interest. Real estate is another type of investment opportunity, with the prices of homes and land constantly rising and falling. Other investment opportunities include classic automobiles, collectibles, foreign currencies and commodities, such as agricultural products and precious metals.
One of the ways to differentiate between investment opportunities is by examining the amount of risk each one represents. Economists refer to a given investment's likelihood to change its value as volatility. For example, stocks are highly volatile since new products and financial reports can make investors more or less willing to own shares in a company, causing the price to drop or rise. Government bonds, on the other hand, have a very low volatility and represent safe investment opportunities that have limited room for growth. Predicting volatility and accounting for risk are essential to making money consistently by investing.