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:
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- Risk of failure
- It offers a return
- 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.
REFERENCES:
https://www.investor.gov/introduction-investing
https://www.nerdwallet.com/blog/investing/how-to-invest-money/