A way to produce income by holding an asset to be sold at a higher price (i.e. appreciation). An investment always concerns the outlay of some asset today (time, money, effort, etc.) in hopes of a greater payout in the future; and since it is oriented toward future returns (and no one knows the future) it often carries risk.

It has three characteristics that are different from money:

    1. Risk of failure
    2. It offers a return
    3. Less liquid then money

Understanding your basic financial picture is the first step toward investing. Investing is not “trading”. Trading is a short-term buy-sell strategy. Investing is a long-term strategy for achieving your financial goals. Both involve timing, one just has a longer time horizon. A good way to think about investing is by asking- Are you long because you like it or do you like it because you’re long?

You can start by answering these simple questions:

1. What do you have?
2. What do you owe?
3. What do you make?
4. What do you spend?
5. What are your long-term goals?

EXAMPLES: Common forms of investment include financial markets (e.g. stocks and crypto), credit (e.g. loans or bonds), assets (i.e. commodities, artwork, and real estate), and starting/expanding a business.


« Back to Glossary Index